Get Some Breathing Room

With all of the reports in the news about the difficulties small businesses face in accessing credit, the bigger story is overlooked. Many small businesses contract with the federal government for net payment terms of 30 days on submission of an approved invoice. The federal government is stretching its payments out to 140 – 150 days, in effect, extracting interest-free financing from small business suppliers. Even worse, if the small business is the prime contractor, it must pay its sub-contractors even before it receives payment from the federal government. The Fortune-500 are also stretching out payments, although not to that extreme. Being an unwilling creditor is a more serious problem than being unable to access credit.

And with that happy thought, I would like to suggest that residents in the Houston-Galveston area in the wake of Ike begin to negotiate longer payment terms, reductions in interest rates or any other forbearance that they can with their creditors. In disaster recovery mode, everything takes longer than you think it will. Try to negotiate some breathing room for yourself while the powerful images of the disaster give you some negotiating leverage or sympathy. It is better to negotiate early in the process then when your accounts go into arrears and blemishes start to appear on your credit report. And it will reduce your stress level.