Many business owners turn to their suppliers for capital only as a desperate measure -- if collections fall behind or bank credit lines dry up. But Gus Walbolt, the president and owner of AMCAL, based in Concord, Calif., has long considered supplier financing an essential ingredient of his fine-art publishing company's 20-year growth plan.

"The idea originally came to us in our early years, when we had just a single product line, high-quality calendars," Walbolt recalls. "Business was enormously cyclical. We would spend half the year flush with cash, but when we produced and shipped the calendars, we were cash poor."

Walbolt and his father, then the company's CEO, worked out an arrangement with their printing shop: AMCAL covered the printer's labor and materials costs when they were incurred, mainly during the summer months. The publisher paid the printer's profit margin only when its own accounts receivable started to flow, mainly during the late fall. "We have since approached all our major production vendors to work out similar terms," Walbolt notes.

The CEO is quick to emphasize that "you can't ask a favor from your suppliers if you're not willing to do something in return. We try to be everyone's favorite customer. We're polite. It's funny how helpful that can be -- and how often businesspeople don't bother." Walbolt also builds a personal relationship with his suppliers' key financial staff, and, he says, "we never, ever make a promise to anyone that we can't keep."

To business owners considering supplier financing, Walbolt recommends an aggressive approach. "We wouldn't consider asking just any company to agree to this kind of relationship," he says. "First we research a range of suppliers to find a high-quality company that we can become an important customer to -- either because it wants to move into our market or because we're the right size to utilize all its services." (For other tips, see "Supplier-Finance Primer," [Article link].)

He proposes various payment arrangements only after holding a series of face-to-face meetings with the supplier's management -- at both AMCAL's headquarters and the supplier's. "We've done this even with overseas suppliers and found that they're impressed by the attention we pay them," he notes. Walbolt has succeeded not only in negotiating longer-than-usual payment terms from his international vendors but also in arranging "payment that becomes due only when items arrive here, rather than from the date on which they're shipped. That's an invaluable concession that buys us even more breathing space," he stresses.

The CEO's most recent coup: "We recently signed an arrangement with a Kansas City supplier that will allow us to finance more than $400,000 for several months. That's a tremendous help for us in controlling our cash flow and maintaining the company's growth."