Long a thorn in the side of the small business sector, late payment is causing more and more mental health problems among company owners. Alternative finance can help relieve the pressure on cashflow and help reduce stress, anxiety and depression.

The number of small businesses on the brink of collapse as a result of late payment has grown by almost a quarter since last year. The issue, according to a new survey from BizHelp24, is affecting more than 2.5 billion small firms, and costing the sector as a whole a whopping £3.6 billion.

Is it any wonder that late payment is a key factor behind a huge rise in the number of business owners suffering mental health problems? Over 50% of small business owners blame poor cashflow for panic attacks, anxiety and depression.

These findings chime with wider research on mental health in the workplace. A recent study by the Mental Health Foundation, which polled almost 5,000 people, revealed that almost 75% had become so stressed at work that they felt overwhelmed or unable to cope. Whether it’s employers or employees, from a purely business perspective, a rise in mental health issues in the workplace is a serious threat to productivity and performance.

So, it’s simple: the way to combat late payment-related ill health in the workplace is to properly combat late payment. Unfortunately, this is where it stops being straightforward. Despite a sharper focus on the issue in recent years, the varied efforts to tackle late payment have brought next to nothing in terms of definitive results.

Commendably, the Federation of Small Businesses has renewed its pressure on larger firms to do more to end poor payment practices. The move comes in the wake of the Parliamentary joint select committee on the collapse of Carillion. The controversial failure of the multinational facilities management and construction services company exposed a damning supplier payment culture and the weakness of the Prompt Payment Code. According to Federation research, over 80% of small businesses experience late payment; worryingly, almost 40% of firms reported that payment practices have worsened since 2016, affecting cashflow.

So, what can small business owners do? There is plenty of good advice out there, including getting terms and conditions right, credit-checking customers and chasing up overdue payment quickly. Owners should also add invoice finance to their arsenal.

Invoice finance can help small businesses safeguard payment without recourse to drastic action, such as legal proceedings, that pose a threat to potential key business relationships. And more and more small business owners are making use of this and other alternative finance services. According to analysis by Wesleyan Bank, almost 60% of SMEs have tried external funding, such as invoice finance and crowdfunding, with over a quarter of firms using it regularly. The number of firms in the latter category has risen by 20% since 2016.

This is how a Sussex small business used alternative finance, through a commercial finance broker than specialises in alternative finance, to raise money to buy new equipment.

If the seriousness of the impact of late payment needed underlining, then the reports of rising SME owner ill health related directly to the practice do just that. How the issue can be resolved remains unclear, but alternative finance has a role to play in relieving the pressure on cashflow and on the people who run small businesses.

To find out more about A&T Business Associates services, contact Tony on 01903 602211 or tony@atbusinessassociates.co.uk.