Vendors Can Help With Small Business Financing

Vendors Can Help With Small Business Financing

Friday, February 19,2010 06:52 AM

Strong relationships are vital in landing financing. That's why some small business owners have found luck with a group they already know well—their vendors.

Negotiating with vendors to secure better trade terms isn't new. But research indicates that owners do so more aggressively when they can't rely on lines of credit from traditional lenders.

According to semiannual surveys from the National Small Business Association in Washington, between 22% and 29% of business owners relied on vendor credit to meet their capital needs between August 2008 and December 2009. That number hovered at about 18% prior to the credit crunch, according to other surveys published by the advocacy group.

Vendors may be open to modifying contract terms, particularly if they are smaller and more flexible operations. To keep customers happy and paying on time, vendors have grown increasingly willing to extend interest-free pay cycles or provide trade credit, which discounts a promptly paid invoice These arrangements can improve cash flow and infuse a business with capital.

Read the rest at wsj: http://online.wsj.com/article/SB10001424052748703444804575071461603849270.html?mod=googlenews_wsj