We’re in new territory right now, with COVID-19 shutting down more and more of the country (and world). Small businesses are already feeling the impact, and at Nav, we’re getting lots of calls from concerned entrepreneurs who want the best financing options they can find to help them stay afloat, given the situation. One of those opportunities could be to negotiate vendor terms because of coronavirus.
Whether or not you decide to apply for a loan or line of credit, there’s something else you should consider doing: negotiating new terms with vendors. In some cases, it might be all you really need to do to get a little extra financial wiggle room.
The Benefits of Net Terms
If you don’t already have tradelines with the vendors you buy from frequently, start there. Rather than having to instantly pay for an order, net terms like net-30, net-60, or even net-90 give you a little breathing room between making a purchase and paying for it in 30, 60, or 90 days.
Another perk of having net terms with vendors is that it may help build your business credit if the vendor reports your payment to business credit bureaus. Not all do, though, so it’s worth asking about.
Times are Tough
Right now, we are experiencing unprecedented economic turmoil. Bars and nightclubs have shut down in many cities. Restaurants are only offering to-go orders. Shopping, remodeling, or planning events are not on people’s minds (beyond stocking up on toilet paper and food), and small businesses are suffering as a result.
We certainly hope things improve quickly, otherwise many small businesses may struggle to make it in the aftermath. Many small businesses only have enough cash on hand to get them through 45 days…or less. Given that there is no way to determine how long coronavirus will impact them, many are understandably concerned.
What You Can Do
If your small business is struggling right now, consider asking your vendors to increase the time on your payment terms. If you don’t have terms at all, start by asking for 30-net. If you have that, ask for 60 days.
It’s not guaranteed that your vendors will agree to this, but they have to understand: we’re all in the same boat. Extending your terms and getting paid later is better than not getting paid at all. Most vendors should appreciate that you, as a small business owner, are being proactive in reaching out now rather than waiting until you can’t pay an invoice to negotiate, and if you have a longstanding relationship with them, they should value your business enough to come to an agreement.
Even just a few weeks’ extension could be what you need to get back on top of your finances. It never hurts to ask. We’re at a time when we need to band together to help one another get through these trying times.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.
This article was originally written on March 17, 2020 and updated on March 31, 2020.
How can I build business credit without having to use my personal social security?
Lilianna – When it comes to small business financing your personal credit may be checked, and lenders often require personal guarantees. That’s not always the case but it’s common. You can learn more about building business credit here.