How To Finance Your Business in Between Big Payments

Many small businesses contract with large companies that take the full 120-day limit to pay their bills. The result is that small firms often come up short in terms of working capital between payments. And unless those small companies offer a product or service unavailable in the rest of the market, they have little negotiating power with the big firms. This situation makes for some tough choices for small businesses.

Take a Discount

These big companies will often offer payments earlier than the four-month timeline but with a discount on the total bill. In some cases, this can actually be a good strategy for small businesses. If the only way to finance their daily needs in between payments is with high-interest credit cards or even higher interest rate alternative loans, taking the discounted payment may be more profitable in the long run.

Get a Working Capital Loan

Those who have access to low-cost bank loans can make it through the payment cycles with working capital loans or other types of small business loans. Working capital loans can provide cash in a lump sum or sometimes as a line of credit to be used as needed. This type of borrowing is generally much cheaper than credit cards and payday loans.

Collect Your Payments Faster from Other Clients

One more avenue small businesses can try is being more aggressive in collecting timely payments from all other customers. This can include updating to an automatic billing system or offering clients more payment options like direct deposit. Small firms can even try offering discounted payments to their own suppliers to reserve their cash.

Keeping cash flowing in between big payments can require some creative thinking on the part of small business owners but it is possible to stay afloat and remain profitable.


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