Lenders may be more hesitant to provide financing, as it represents a higher risk. This can make it more difficult to secure financing or lines of credit at favorable terms.
The business may incur increased costs associated with managing cash flow, such as overdraft fees, late payment penalties, or the need for short-term loans. These costs can add up over time, reducing profitability and hindering growth.
Long Term Impact
Predicting future revenue and cashflow needs becomes increasingly challenging. This can make it more difficult to manage cash flow on a day-to-day basis, and may require the business to take a more reactive approach to financial management.
The inability to consistently meet payments or deliver products on time, can create trust barriers between suppliers and customers alike.