Many suppliers to small and medium sized enterprises (SMEs) are still recovering from the crippling blow dealt to the global financial system a decade ago.
After the Federal Reserve implemented new regulations in 2008, banks tightened lending standards and in turn, large corporations were forced to implement new strategies to improve access to working capital cash trapped in the supply chain.
Ignoring fears of disrupting their supply chain, corporations started extending their days payable outstanding. Before long it had become the new normal.
Converting receivables to cash is one of the largest hurdles for smaller companies looking to cover its day-to-day expenses.
Suppliers waiting to be paid in 60 days have found their days extended even further to 90 days or 120 days with no warning.
“Companies are also leaning on their suppliers” to lower their pricing and accept longer payment terms, says Denise Devitt, VP and senior commercial banker at BMO Harris.
With Paygevity, suppliers avoid expensive factoring arrangements comprised of high interest rate loans, personal guarantees, liens on their account receivables and low loan-to-value (LTV) advance rates.
With Paygevity, suppliers get paid immediately at a low discount.
