Few entrepreneurs rely on supplier credit as heavily as Gus Walbolt of AMCAL does. (See "When Supplier Credit Helps Fuel Growth," [Article link].) Still, "it's a legitimate technique for providing working capital when necessary," says Joel Cherwin, a lawyer at Boston law firm Cherwin & Glickman. "But you've got to take control of the situation rather than act like a cash-flow victim." Here's how:
Â· Divide your business among suppliers. That way you can stagger your payments to them as necessary but still pay your bills if your creditors become impatient.
Â· Patronize different vendors. "If you do enough searching, you may be able to find vendors from other regions or industries whose payment terms are more favorable than you're used to."
Â· Avoid the three M's: mistrust, miscommunication, and misunderstanding. "When you need to extend payments because of cash-flow concerns, explain your situation to suppliers. Convey the impression that you are an honorable person working to get your company's finances under control."
Â· Be cautiously aggressive. "Propose a payment plan your company can meet," says Cherwin, "but while you're negotiating, let your supplier know about other companies that want your business."* * *