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Supplier-Finance Primer

Advice on supplier-financing arrangements.
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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:

· 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.

· 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."

· 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."

· 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."

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Last updated: Mar 1, 1995




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