Bridging the Small Business Cash Flow Gap
According to The Wall Street Journal, one of the ways the economic crisis is affecting small business owners is that many customers are slow to pay. Receiving payments days or weeks late can be catastrophic to small businesses, which typically have much smaller cash buffers than their larger counterparts. It isn’t only other small businesses that are paying late; often, large business customers pay their smaller suppliers last. The rationale cited in the article is that customers want to keep their largest suppliers the happiest and are most likely to be pressured to pay by suppliers with the resources to hassle them about late payments.
What’s a small business owner to do when customers are behind in their payments and credit at banks continues to be tight? Those with good credit continue to turn to Lending Club for affordable financing. By taking out a 36-month P2P loan, business owners can effectively bridge the cash flow gap. Loan proceeds can cover everything from payroll to accounts payable until customers finally make their payments.
While small business owners may feel helpless when large customers pay late, there are a few things that can be done. As diminishing cash flow becomes a higher priority, so too may applying pressure to the customer. Cashing checks as soon as they arrive is also critical, given the wave of bankruptcies of late. CNBC recently showed a check that a small business owner had returned for insufficient funds from one of its customers: Lehman Brothers. Negotiating penalties for late payment is also helpful, though that is best done when new accounts are created and small businesses may be leery of scaring away potential customers.
As is often the case, those least able to survive late payments are often the ones most likely to experience them. What might be a minor nuisance to a larger business could end the existence of a smaller one. Using a P2P loan from Lending Club could keep a small business afloat long enough to survive the current financial crisis.
Have your customers been slow to pay you lately? What impact has that had on your business?