Smart Funding Strategies to Overcome Long Payment Cycles

Long payment cycles remain one of the most persistent challenges for small and medium-sized businesses (SMBs), as they pose one of the biggest threats to SMB cash flow. According to PYMNTS, 64% of companies experience delayed payments, with suppliers waiting an average of 43 days to receive funds. Allianz Trade adds that the global average days sales outstanding (DSO) has risen to 59 days, and one in five companies waits more than 90. Either way, in a market where agility and resilience define competitiveness, these delays can quickly turn into stalled operations, missed opportunities, and unnecessary financial strain.

To stay resilient, SMBs must approach cash flow management strategically by combining stronger internal practices with the right external funding solutions. Below, we break down the most effective approaches, with a spotlight on invoice factoring, the tool many SMBs are using to turn delayed receivables into growth capital.

Internal Strategies

Before looking outward, SMBs should start by optimizing how they manage receivables, expenses, and payment terms to prevent or minimize cash shortages.

Optimize Invoicing and Collections

• Invoice immediately upon delivery, not at month’s end.
• Implement automated invoicing platforms to send reminders, track payments, and flag overdue accounts.
• Offer multiple payment options (ACH, card, payment apps) to reduce friction for customers.

Negotiate Smarter Terms

• Research customer payment cycles and set terms accordingly.
• Offer early payment discounts (e.g., 2% for payment within 10 days).
• Aim to shorten terms from 60–90 days to 30–45 days whenever possible.

Forecast and Control Cash Outflows

Only 38% of SMBs have real-time visibility into their cash position. Adopting forecasting tools—integrated with accounting software or powered by AI—helps anticipate gaps and plan for upcoming obligations before they become crises.

These measures reduce dependency on external financing—but in many cases, they aren’t enough to fully protect liquidity. That’s where funding solutions come in.

External Funding Solutions

When internal optimization still leaves cash flow exposed, SMBs can leverage external financing tools. Each comes with trade-offs in cost, speed, and accessibility:

Working Capital Loans and Lines of Credit

• Short-Term Loans: Funding between $25,000–$600,000, with repayment terms of 6–24 months. These are best used for known, one-time needs.
• Business Lines of Credit: Revolving facilities up to $250,000, with interest paid only on what’s drawn. It’s effective for seasonal or unpredictable gaps, but rates can range from 8% to 60% depending on creditworthiness.

These tools provide flexibility, but they add debt obligations and require strong business credit—something many SMBs lack.

Supply Chain Finance

This buyer-led model leverages the credit rating of large customers instead of the supplier’s financial strength. Once invoices are approved by the buyer, suppliers can receive up to 100% of invoice value at lower rates than factoring or traditional loans. The drawback: these programs are usually tied to large corporations with established networks—making them inaccessible to many SMBs.

Alternative Lending Tools

• Merchant Cash Advances (MCAs): They provide quick access to $5,000–$600,000 based on projected credit card sales, repaid daily/weekly through sales deductions. Fast, but often costly.
• Asset-Based Lending (ABL): Uses inventory, equipment, or real estate as collateral to unlock larger financing. It’s useful for asset-rich businesses but not ideal for service-heavy SMBs.

These solutions can solve urgent liquidity needs but rarely support long-term growth, given that they are often expensive, debt-heavy, or dependent on external approval cycles.

Factoring: The Smartest Path to Overcoming Payment Cycles

Invoice factoring addresses the problem at its core: delayed customer payments. By selling receivables to a factoring partner, SMBs unlock 80–90% of invoice value upfront, usually within 24–48 hours. When the end customer pays, the factor releases the balance minus a small fee (typically between 1% and 4%, depending on invoice size, volume, and customer risk).

For example, a $50,000 invoice could give you $45,000+ in cash within 24 hours, turning a 60-day wait into immediate working capital.

Why factoring outperforms other funding solutions:

• Immediate liquidity without waiting 30, 60, or 90 days.
• No new debt, since invoices are sold, not borrowed against.
• Customer creditworthiness matters more than yours, making it accessible to younger or growing firms.
• Options for recourse and non-recourse factoring depending on risk tolerance.
• Scales with your sales—the more invoices you issue, the more liquidity you unlock.

For SMBs facing extended payment cycles, factoring isn’t just a cash flow fix—it’s a strategic tool to stabilize operations, fund growth, and compete with larger players.

Read more:

https://blog.summar.com/how-flexible-funding-helps-businesses-prepare-for-uncertainty

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Summar Financial an Ally for Growth

At Summar Financial, we understand that cash flow challenges can hold SMBs back from seizing opportunities. That’s why we offer true non-recourse invoice factoring, ensuring your business is protected if your customer defaults.

What sets Summar apart:

• Simple qualification so you can unlock funding faster.
• Competitive advance rates of up to 90% of invoice value.
• A human-first approach that goes beyond funding to provide guidance and partnership.
• Scalable solutions that grow with your sales volume, not against it.

Whether you’re an exporter, wholesaler, or service-based SMB, Summar Financial helps you turn long payment cycles into steady cash flow and sustainable growth.

Ready to turn slow-paying invoices into cash flow?

Contact us today to explore how our factoring solutions can keep your business moving forward.