More and more these days, I feel like a bank. I have counseled my clients for years that they should not take on this role with their clients by extending payments terms to them that hurt their business.

But with the Great Recession in full swing, small business owners are finding ourselves more and more in the position of extending credit to customers beyond what we can afford. This becomes especially prominent around April 15th as the great cash chase happens so we can all pay the government.

This is a current trend because banks are no longer providing credit to businesses so each business needs to rely on their own vendors to be their bank. Even Fortune 500 companies are extending their terms to their small vendors to help their cash crunch.

One of my clients wrote me to wonder “if there is a way to do some wild calculation on the billions of dollars in credit held by banks previously, that are now being forced upon small businesses and individuals?”
He calls this the new “Trickle Down Theory”. He tells me that “Credit is now distributed among 100’s of thousands of small business owners, and the original terms of net 30 terms extended over these forced trickle down “loans”, results in an extension of credit to net 360 for the original purchases by the BIG company.”
Have you become a bank? Are you feeling the trickle down?