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Big companies help small ones by paying them sooner

SupplierPay

President Barack Obama (C), National Economic Council Director Jeff Zients (L) and White House Senior Advisor Valerie Jarrett meet with more than 40 company executives and their small business suppliers in the Eisenhower Executive Office Building July 11, 2014 in Washington, DC.

President Obama has announced a new initiative meant to help small businesses. It's called SupplierPay and it’s designed to get big companies to pay their smaller suppliers faster. 

The White House says 26 companies including big guys like like Apple and Coca-Cola  are participating in SupplierPay.  They’re promising to pay the small businesses they hire for parts or services more quickly, ideally within 15 days.  That sounds like heaven to small business owner Rexanne Metzger. 

Now, she says, “There’s a very few corporations that will pay in 30 days.  It’s more like 45 days.”

Metzger is president of Davis Interiors, in Norfolk, Virginia, which makes custom interiors for Navy ships. They're a supplier for the big defense contractors, but she’s had to take out a line of credit to cover her bills.  Even if those companies paid her just a few days faster, she says, it would provide some relief.

“It does help because then we don’t have to pay that interest on our line of credit," she explains.  "Every day that we don’t get paid costs us money.”

Small businesses across the country are feeling the pinch of late payments.  Janet Sanders sees it every day.  She’s CEO of Incom Direct, which helps small businesses process credit card payments. Sanders says now, her average client needs the day’s charges fast.

“At the end of the day he wants those electronic transactions converted to cash as quickly as possible – put back in his bank account," she says.

Big companies have been taking longer to pay their small suppliers since the recession.

“It’s free money, basically,” says Charles Mulford, who teaches accounting at Georgia Tech. 

Mulford says big corporations are taking 35 to 40 days to pay, a few days more than before the economic downturn.  He understands why they do it.

“The larger companies can essentially borrow from the smaller companies and not pay interest, in effect,  on that money,” he says.

Will the president’s SupplierPay initiative help?  Mulford says that’s not clear.  But at least it’ll call attention to the problem. 

INTRO: Small businesses play a vital role in the economy.  Creating nearly two out of every three new jobs in the US, according to the White House.  When they hurt, the rest of the economy suffers.   So today President Obama today announced a new initiative meant to help the little guys.  It’s called SupplierPay.  And it’s designed to get big companies to pay their smaller suppliers faster.  Marketplace’s Nancy Marshall Genzer reports.

 

 

MARSHALL GENZER 1

 

Twenty six companies are participating SupplierPay.  Big guys like Apple and Coca Cola. They’re promising to pay the small businesses they hire for parts or services quickly.  Ideally within 15 days.  That sounds like heaven to small business owner Rexanne Metzger.  Now…

 

ACT REXANNE METZGER :05

“There’s a very few corporations that will pay in 30 days.  It’s more like 45 days.”

 

MARSHALL GENZER 2

 

Metzger is president of Davis Interiors, in Norfolk, Virginia.  They make custom interiors for Navy ships. Working as a supplier for the big defense contractors. She’s had to take out a line of credit to cover her bills.  She says, even if those companies paid her just a few days faster, that would help.

 

ACT REXANNE METZGER  :07

“It does help because then we don’t have to pay that interest on our line of credit.  Every day that we don’t get paid costs us money.”

 

MARSHALL GENZER 3

 

Small businesses across the country are feeling the pinch of late payments.  Janet Sanders sees it every day.  She’s CEO of Income Direct, which helps small businesses process credit card payments. Sanders says now, her average client needs the day’s charges, fast.

 

ACT JANET SANDERS :08

 

“At the end of the day he wants those electronic transactions converted to cash as quickly as possible – put back in his bank account.”

 

 

MARSHALL GENZER 4

 

Charles Mulford teaches accounting at Georgia Tech.  He says this is a trend.  Big companies have been taking longer to pay their small suppliers since the recession.
ACT CHARLES MULFORD :02

“It’s free money, basically.”

 

MARSHALL GENZER 5

Mulford says big corporations are taking 35 to 40 days to pay.  A couple days more than before the economic downturn.  He understands why they do it.

 

ACT CHARGLES MULFORD :08

 

“The larger companies can essentially borrow from the smaller companies and essentially not pay interest on that money.”

 

MARSHALL GENZER 6

Will the president’s SupplierPay initiative help?  Mulford says that’s not clear.  But at least it’ll call attention to the problem.  In Washington, I’m Nancy Marshall Genzer for Marketplace.

 

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

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