Stampede's A/R turnaround days are higher than industry benchmarks. Why is this not a warning signal against lending?

A higher accounts receivable (A/R) turnaround day indicates that it takes longer for a company to collect payments from its customers compared to industry standards. While this could typically raise a red flag for lenders, in the case of Stampede, the reason behind their extended turnaround days is that they have strategically chosen to provide favorable payment terms to a key customer.

This approach can be beneficial for several reasons. It may strengthen the relationship with a significant customer, encouraging loyalty and possibly leading to increased sales over time. By offering better payment terms, Stampede is likely prioritizing long-term customer satisfaction and retention over short-term cash flow issues. This strategy can be viewed positively by lenders, as it demonstrates that the company is willing to invest in its relationships for future growth, potentially leading to more stable revenues in the long run.

Lenders often assess not only the financial metrics but also the strategic choices a company makes in its operations. In this context, the favorable payment terms are a calculated risk that could yield greater rewards, providing a justifiable reason for lenders to overlook the higher A/R turnaround days.