- You sell on credit terms, 30, 60, or even 90 day terms, but you have to pay your payroll, rent, overheads weeks if not months before you are paid by your customers. And your payment terms with your suppliers are shorter than the payment terms you have given your customers.
You carry imported stock which you have paid for weeks or months before it lands in your warehouse.
You are paid by way of progress claims for which you also provide credit so you receive payment long after you have paid your direct factory expenses or subcontractors and materials expenses. Furthermore, retention payments are withheld by your head contractors or by your customer.
There are ways to address every one of these circumstances which involve redesigning your business model and also using appropriate means of financing, most of which are still available, even if you are already in financial distress.