Cash flow and banking for founder led lower-middle market companies
This page is for founder led lower-middle market companies with 5 to 50 million in annual revenue. The goal is steady control of cash, clear terms, and strong lender relationships.
Questions and short answers
How much runway or liquidity is healthy at our size
Target three to six months of operating costs in cash and available credit, with more if demand is volatile or inventory heavy. Build a rolling thirteen week cash forecast and set alert levels for covenants and headroom. Review weekly with finance and monthly with leaders.
Set your runway and liquidity targets
How do I improve the cash conversion cycle
Work each lever. Faster billing and collections to lower days sales outstanding. Tighter inventory planning and turns to lower days inventory on hand. Better supplier terms to extend days payable. Use deposits, progress billing, and standard lead times. Track the cycle each month and tie projects to the biggest gains.
Improve the cash conversion cycle
What is a fair approach to payment terms with customers and suppliers
Publish clear standard terms by segment. Ask for deposits on custom work and milestone billing on long projects. Offer a small early pay discount only when it lowers cost. With suppliers, align terms to your cash cycle and volume. Use scorecards and a review cadence so both sides see performance and issues early.
Design a payment terms policy
Which debt options make sense for working capital and for growth
Use an operating line secured by receivables and inventory for working capital. Use a term loan for equipment or build outs. Consider subordinated debt or venture style debt for growth investments with clear payback. Match loan length to asset life and keep covenants simple and trackable.
Choose the right debt options
How do I manage bank covenants and communicate early
Track covenants monthly with a simple dashboard and a three quarter look ahead. If headroom is tightening, prepare actions that lift margin, reduce spend, or add equity. Share a short pack with your banker early that includes the thirteen week cash view, backlog, pipeline, and the action plan with dates.
Manage covenants and talk to lenders early
Related links
/finance-and-profitability
/operations-and-supply-chain
/strategy-and-growth
Last updated: August 27, 2025
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