You're Your Customer's Cheapest Lender. You Just Got Cheaper.

A client ran the number before nine the morning after the decision. He carries $4.1M on a revolver priced off SOFR, and a quarter point costs him about $2,900 through year end, roughly $10,000 annualized. He wanted to know whether to take it out of marketing or just eat it.

Neither. He was looking at the wrong side of the balance sheet.

Your receivables reprice too, just later

The Fed moved to 3.75% to 4.00% on Wednesday, its first hike since July 2023, and by Thursday morning JPMorgan, Bank of America, Wells Fargo, Truist and the rest had prime at 7.00%. Every customer of his who funds working capital off prime woke up more expensive. So did their treasurers' patience.

Run his other number. Sixteen million in revenue is about $43,800 a day. His DSO has been sitting at 54. Six days of slip moves $263,000 out of cash and into receivables, and he funds that gap on the same revolver we were just discussing. Carry on $263,000 at his all-in 6.9% is roughly $18,000 a year.

Ten thousand for the rate increase he can see. Eighteen thousand for the one he can't. And a quarter million dollars that stops being available to him at all. Six days is not a stress scenario. Average US B2B DSO runs about 47 days, and 55% of invoices in this country are already paid late.

Nobody stretches a supplier over 25 basis points

No AP clerk reads an FOMC statement and decides to pay you in 60 instead of 45. What happens is slower and more bureaucratic. A treasurer at a company much larger than yours sees the direction of travel, notes that sixteen of eighteen Fed participants expect another increase before year end, and sends a memo about conserving revolver capacity. That memo becomes a payment-run policy. The policy reaches you four to six weeks later as an invoice that ages past terms with no explanation and nobody to call about it.

Supplier credit is the only money in their building with a zero coupon. It was already the cheapest thing they could borrow. As of Thursday it's cheaper relative to everything else, and the gap widens again if the Fed moves in December.

You'll see the hike in your interest expense in October. It shows up in your aging in November, and by then it's a collections problem instead of a pricing one.

Do the exercise in reverse this week

Pull your top ten customers and mark which ones fund working capital off a bank line. Public filers tell you outright. For private ones, ask your rep how they pay, or check whether their behavior moved the last time rates did. Those accounts are where terms slip first.

Then take the customers where you hold pricing power and shorten before they lengthen. Net 30 with a late fee you actually charge beats Net 45 you defend twice a quarter. Deposits on custom work. Milestone billing on anything running past a month. None of this is new advice. What changed Wednesday is the arithmetic behind it, and most companies your size won't reopen terms until renewal season.

My client kept the marketing budget. He moved his three slowest accounts to 50% deposits instead, which freed more cash than the entire rate increase costs him.

Twenty-five basis points is a line item. What your customers do about their own twenty-five is a cash flow event.