Late payments leave SMEs struggling to access finance
The ability of small businesses to access funding is being directly hit by the slow payment culture that exists across the UK.
While new data reveals that supply chains and reputation are also being hit, it is the damage to credit ratings that is especially concerning for SMEs.
According to figures from Close Brothers Asset Finance, the issue of late payments is having a lasting impact on many small firms as they are struggling to access finance as a result.
The business barometer also showcased that many businesses are locked in a vicious circle as they are often unable to pay their suppliers while they wait for finance from elsewhere.
One in four firms also reported that they had sought legal advice on how best to approach the issue, while three in four do not believe there are adequate support networks in place.
The appointment at the start of October of a small business commissioner to tackle late payments should give companies some backing, although there a number of issues for new incumbent Paul Uppal to resolve.
A cultural shift is required in the way payments are managed, especially between larger and small firms – further new regulation that requires large firms to publish payment practices is seen as a step in the right direction by many SMEs.
Accessing finance and scaling up are commonly cited as major issues facing SMEs in the UK, especially as the processes can be both daunting and time consuming.
A range of alternative finance options are available to help firms with their short and long-term plan, which can prove essential for those faced with cash flow problems, debts or a lack of working capital.
Small businesses are currently owed in the region of £26.3 billion in late payments and those worst affected can end up facing insolvency if their cash flow issues are not adequately resolved.
Those facing difficulties should seek advice on their potential options at the earliest opportunity, as this should provide an insolvency practitioner with more room to find a solution.
By Phil Smith