For small businesses, prompt payment can be the key to survival and success. President Barack Obama has announced a new initiative to help small businesses get paid faster and increase their capital.
Waiting for customers to pay their bills can make it difficult for small businesses to pay off the expenses needed to stay in business, much less expand the business. The White House’s SupplierPay initiative plans to help with this issue.
SupplierPay is launching with 26 companies already committed. Johnson & Johnson, Lockheed Martin Apple, CVS and FedEx are among the organizations who pledged to provide timely payment to small business suppliers.
The idea is that by getting faster payment, small businesses will have more available capital for growth opportunities, necessary equipment or other expenses. Faster payment can also help small business owners avoid taking out unnecessary loans or financing.
Small businesses may not be able to turn down a big job, even if they are short on funds because they are awaiting payment. So if a catering company gets hired to host a huge event for a company, they will probably take it in hopes of creating a long-term corporate client.
If they don’t have the money on-hand for the big job, they may have to resort to borrowing money. And since small businesses often have higher costs for borrowing, these actions can be difficult to sustain long-term.
SupplierPay was inspired by QuickPay, a federal government initiative that Obama began in 2011. QuickPay hastened payments from federal agencies to small business contractors aiming to get them paid within 15 days.
Since its launch in 2011, QuickPay has saved small businesses more than $1 billion, according to the White House.
The importance of SupplierPay was outlined on the White House blog, stating that half of U.S. workers are employed by small businesses and almost two-thirds of new positions created in the U.S. are for small businesses.
With so many Americans working for small businesses, the White House believes that getting faster payments for them can help improve their chances of success, making the entire country more prosperous.
