If everyone paid their invoices on time, then managing cash flow would merely be difficult instead of nearly impossible. Your customer's inability or unwillingness to pay on time has a direct bearing on your ability to pay your suppliers on time. For new companies, whose cash positions are often tenuous, the consequences can be frustration, fear and the learning of new phone skills.
Having a line-of-credit against receivables helps smooth out the ups and downs. Our new banking partner considers a receivable "good" if it is less than 90 days old. (Our ex-banking partner used 60 days). The reason for the 90 days is that so many of this region's companies rely on the automobile companies to pay their bills. Evidently the Big-3 can be notoriously slow to pay bills.
Of the receivables less than 90 days old, we can "draw" (borrow) up to 75% of the amount. Interest on the amount borrowed varies depending on several mysterious factors all of which are used by the bank to come up with their "base rate". Interest is deducted by the bank monthly. We can draw and repay by phone in increments of $1,000. We supply the bank with monthly "aging" (receivable) reports to show that we are staying "in formula".
This type of line-of-credit is convenient and can really help your company past the "slow pay" time of year. Just be sure you have the discipline to pay down your balance when the money does come in. Even if your shipments keep you in formula, your bank may want to see the line "rested" (paid down to $0) once a year. Or the length of the agreement may expire and the entire balance becomes due and payable.
A hidden "benefit" of this type of arrangement is the added incentive it gives you to keep on selling and shipping product. Nothing like being in debt to keep the motivation level high.
Be prepared to provide your personal guarantee when you sign the bank papers. Since you have complete faith in your enterprise and your abilities, this should not bother you. You know that you will be an overnight success in about 5 years.