Companies Are Increasing Payment Cycle

As the economy continues to struggle, companies of all sizes are looking for ways to assist their cash flow requirements.  Larger companies that have the power are unilaterally deciding to slow their payments to their vendors.

A recent article in the Wall Street Journal states, “In an example of corporate Darwinism at work, the recent round of quarterly earnings results showed companies with annual revenue of more than $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers.”

The trickle down effect of this is tremendous, as the suppliers, typically small or medium sized businesses, are realizing a cash flow crisis.  Typically, established businesses would have no problems turning to their banks for a credit line to help finance this cash flow gap.  But many companies have discovered that that type of financing has dried up, which leaves the suppliers in a bind.  Do they give up on the slower paying (but large) customers?

A flexible factoring product, like the spot factoring option Interface Financial Group offers, can help a company get through these tough times by advancing funds on accounts receivables weeks or even months before the company expects to get paid.  This influx of cash can allow small and medium sized businesses to continue to function until the availability of more traditional bank funding returns.

This entry was posted on 27. October 2009 at 23:19 and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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