Winning a big client is good news until their invoice comes with net-60 or net-90 payment terms. Meanwhile, payroll, supplies, and rent are due on your schedule, not theirs. This gap between earning revenue and receiving cash is one of the most common reasons profitable businesses feel squeezed.
Why slow-paying customers strain cash flow
Every day an invoice is unpaid, your working capital is tied up in receivables. If you have to keep buying materials or paying staff for the next job before the last one is paid, the gap widens. Growth can even make it worse, because larger orders require more upfront spending.
Funding options that fit the gap
- Business line of credit: a line of credit lets you draw when a payment is late and repay when the customer pays, so you only carry the cost while you use it.
- Invoice factoring or financing: these products advance cash against outstanding invoices. Cost and terms vary, and some involve the lender collecting from your customer.
- Working capital loan: a working capital loan provides a lump sum to bridge the period, with a fixed repayment schedule.
- Merchant cash advance: tied to card sales or deposits, it may suit some businesses but often costs more, so compare carefully. See the merchant cash advance page for how it works.
Match the product to the problem
If the slowdown is a recurring pattern, a revolving line may be the better fit because it reopens as you repay. If you have a one-time large invoice, invoice-based financing may target that specific receivable. If you need a set amount for a defined project, a term-style product may make sense. Whichever route you take, repayment should be realistic relative to when your customers actually pay.
Reduce the gap at the source
Funding helps, but you can also shorten the wait. Invoice promptly and clearly. Offer a small early-payment discount if margins allow. Ask for a deposit or milestone payments on larger jobs. Track aging receivables weekly so a late payment does not become a surprise. Be selective about extending long terms to customers with a history of paying late.
What lenders look at
For invoice-based products, the creditworthiness of your customers often matters as much as yours. For lines and loans, expect a review of your revenue, bank statements, and time in business. Having clean, current receivables reports makes the conversation faster.
Frequently asked questions
Is invoice factoring the same as a loan?
Not exactly. Factoring generally involves selling or borrowing against your receivables rather than taking on a traditional loan, and the structure and cost differ by provider.
Will my customers know I am using invoice financing?
It depends on the arrangement. Some structures notify your customers, while others are handled more quietly. Ask before you sign.
Can a line of credit handle net-60 terms?
Often it can, if the limit is large enough to cover your costs during the wait and your cash flow supports repayment.
If slow payments are holding your business back, Fundmerica is a marketplace that connects businesses with funding sources and is not a lender. Apply now to explore your options.