On Friday, President Obama, SBA Administrator Maria Contreras-Sweet and representatives of 26 large corporations announced the launch of SupplierPay, a program to expedite payments to small business suppliers. The model for the initiative is QuickPay, a program launched in 2011 by the White House that requires federal agencies to expedite payments to small businesses with the goal of making the payment within 15 days. According to the White House announcement, SupplierPay is the private sector’s equivalent, where companies have committed to pay small suppliers faster or help them get access to lower cost capital.

The first 26 companies participating in SupplierPay

Apple, AT&T, Authentix, Cardinal Health, Coca-Cola, CVS, Ericsson, FedEx, Honda, IBM, Intuit, Johnson & Johnson, Kelly Services, Lockheed Martin, Milliken, Molina Healthcare, Nissan, PG&E, Philips, Rolls Royce, Rothschild North America, Salesforce, Textura, Toyota, Walgreens, Westinghouse Electric Company.

The continuation of QuickPay

The President also announced the continuation of QuickPay, the program to expedite payments to small contractors working with federal government. According to the White House, the program has cut in half the time it takes participants to get paid, reaching 172,000 small businesses, covering $220 billion in contract awards. Receiving earlier payments can, in certain cases, free up capital that allows the business to invest in equipment and labor

How SupplierPay works

Participating large companies sign a “Small Business Supplier Financing Pledge” that commits them to taking active measures to lower the working capital costs of its small business suppliers. One example is the company Intuit, whose suppliers include approximately 315 small businesses representing about 10 percent of its vendors. Most of its small business suppliers are creative agencies, product development partners and marketing services firms, including many that are women-owned, minority-owned, or veteran-owned.

In 2009, Intuit temporarily changed payment terms to pay its small business suppliers more quickly due to the impact on them caused by the recession. Since then, the accelerated payment terms were adjusted back as the economy started recovering. In support of the SupplierPay program, Intuit is making a permanent change to its payment term policy to accelerate the payment terms for its small business suppliers who will now be paid within 10 days.