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Why big customers encourage invoice funding for their small business suppliers

small business payments

 originally in the financial post

There’s one simple step big customers can take to make sure they can continue to access a popular product or key service from smaller suppliers – help these vendors help themselves.

Small and medium businesses work hard to ensure they can service the bigger clients that support their operations, but standard payment cycles are long, and that can sometimes put a strain on what they’re able to deliver.

No payin’, no gain

The payment cycle is part of doing business for smaller suppliers, yet they tend to shy away from bringing up the very real – and common – cash flow concerns they face from their larger clients.

“There’s this weird dance that goes on between small suppliers and large customers as small suppliers try to project that they are a bigger company than they really are, because they think that that’s what the bigger customers want,” says Steven Uster, co-founder and chief executive officer of FundThrough, an invoice funding service that’s clearing millions of dollars in invoices every month for Canadian business owners.

“It’s a misconception because, in actual fact, some of the reasons that large customers love working with small businesses in the first place is because they are small, they’re nimble and they are responsive.”

Satisfaction begins and ends with service

Bigger companies understand that some of their vendors aren’t as well capitalized as they are, and they aren’t all that concerned about the ins and outs of small business funding, Uster adds.

“What they care about is: ‘Are you performing the service that I asked you to perform? Do my customers like what you’re offering? Are you pleasant to deal with?’ ”

If they are happy with their suppliers, and they want to keep that business relationship strong, large customers can help by supporting a smaller vendor’s choice to use funding services like FundThrough to bridge the gap between the time of invoicing and final payment.

Launched in 2014, FundThrough is currently Canada’s largest invoice funding service. Business owners have cleared more than $40 million in invoices through FundThrough’s service, accessing up to 90 per cent of their outstanding invoices in 24 hours. It allows them to eliminate the wait with invoice payment terms.

Don’t sweat the small stuff

“One of the big concerns of users when they sign up is: ‘What will my big customers think? Will they think that I’m not a strong company?’ ” notes Uster.

“What large customers can do is embrace who their suppliers are, and encourage them to go out and use third-party sources so that they can be prepared to service them properly.”

Signing up is easy and quick. FundThrough is able to help small businesses because, unlike a bank, it looks at the credit rating of the large customer who will be paying that invoice, not the vendor who sent it. The advance is subject to a small interest fee, and when the invoice gets paid, so too does FundThrough — all automatically without hassle for the small business owner.

For these small vendors, the additional support means they can project the stability of a bigger company while investing in their business and fulfilling their obligations to clients. It also shows they are prudent business owners who know how to manage their company’s ongoing needs, since they can inject cash into the business without having to rely on high interest credit cards or lines of credit.

Using a service like FundThrough also ensures their big customers get the products and services they need, without endless phone calls about whether an invoice has been processed.

“You can use it whenever you need it — it’s there in your back pocket. It gives you peace of mind; it gives your big customer peace of mind because they know that you’re well-funded and able to stock inventories,” Uster says.

“It’s a win-win situation for both the customer and the supplier.”

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