Situation
Customers pay me in 60 days but payroll is due now
The most common cash problem in B2B, and the one with the most options. What each costs and which fits.
You are profitable and short of cash at the same time, which is normal and fixable. The cheapest fixes are collections discipline and faster invoicing, then a line of credit, then factoring or receivables financing if the gap is structural. Borrowing long-term money to cover a 60-day gap is the expensive mistake.
Why profitable businesses run out of cash
Profit is an accounting measure over a period. Cash is what is in the account on the day payroll runs. A business can be genuinely profitable and still fail, because the bills arrive on a schedule the customers do not share.
The arithmetic is simple and brutal. If you pay suppliers and staff in 15 days and get paid in 60, every dollar of growth makes the hole bigger. Growing businesses run out of cash more often than shrinking ones, which is why a strong year can be the year you need to borrow.
Do the free things first
- Invoice the day the work is done, not at month end. A week of administrative delay is a week of financing you are paying for.
- Check your actual terms. Many businesses offer net-30 and get paid in 55 without anyone ever chasing. The gap between stated and actual terms is where the money is.
- Call about an invoice at day 31, every time. Most late payment is not refusal, it is a payables department that only responds to prompting.
- Ask for a deposit or milestone billing on larger jobs, so you are not financing the whole project.
- Negotiate your own payables out. Matching your terms to your customers' terms closes the gap from the other side and costs nothing.
If the gap is structural, the options
| Option | How it works | Honest drawback |
|---|---|---|
| Line of credit | Draw when short, repay when paid. The best fit for a recurring, predictable gap. | Needs revenue history and reasonable credit. Get it before you are desperate. |
| Invoice factoring | Sell the invoice at a discount and get most of the cash now. | Costly as an annualized rate, and the factor may deal with your customer directly. |
| Accounts receivable financing | Borrow against the invoices while keeping collections yourself. | Still priced off your customers' credit. Usually needs decent reporting. |
| SBA 7(a) working capital | Cheapest money, long term. | Slow, and sized for a structural need rather than a monthly swing. |
| Merchant cash advance | Fast cash against future revenue. | Usually the wrong answer here. Daily or weekly debits against a cash flow problem tend to deepen it. |
Work out how big the gap really is
Most owners overestimate what they need, and borrow accordingly. The figure you want is the peak shortfall, not the annual total.
- List the next 13 weeks. Each week, write what must go out.
- Against each week, write what is realistically coming in — based on when customers actually pay, not on your terms.
- Run the balance forward week by week.
- The lowest point is the number. That is your facility size, plus a margin.
Thirteen weeks is the standard horizon because it is long enough to show the pattern and short enough to forecast honestly. Then check what the repayment costs against your cash flow in the affordability calculator.
Questions people actually ask
Is invoice factoring a loan?
Technically no -- you are selling the invoice rather than borrowing against it, so it may not appear as debt on your balance sheet. That distinction matters less than the cost: converted to an annual rate, factoring is expensive, and it is worth it only when the alternative is missing payroll or turning down work.
Why am I profitable but always out of cash?
Because profit and cash are measured differently. Profit counts a sale when you invoice it; cash counts it when the money lands. Growth widens that gap, since you fund the next job before being paid for the last one.
Should I offer early payment discounts?
Sometimes, but do the arithmetic first. Offering 2% off to be paid 30 days early is roughly a 24% annualized cost. That can still beat factoring, and it is usually worse than a line of credit.