Late payment has long been a spiky thorn in the side of small businesses, costly them billions, but now the new Small Business Commissioner is spearheading a national effort to crackdown on the practice. What should firms expect?

There is no doubting the impact that late payment has on small businesses. According to the latest figures, these firms are owed an extraordinary £23.4 billion thanks to the late payment of invoices.

This shortfall in income can wreak havoc, leaving companies struggling to maintain cashflow and pay bills. And the consequences can go beyond merely having to juggle financial resources – the Federation of Small Businesses suggests that late payment is a key factor in the collapse of over 50,000 small firms every year.

Relying on the Commissioner and managing late payment costs

Against this backdrop, news that the government is intending to renew its fight against late payment is positive. However, small business owners are unlikely to overly optimistic about an announcement of the likes they have heard many times before.

While late payment has more regularly made in the headlines in recent years, in the business pages at least, repeated attempts to effectively tackle the issue have failed. Notably, a number of Small Business Commissioners have come and gone, along with their promises to find a lasting solution.

Tellingly, while there have been legislative efforts to better regulate against late payment and most recently, a pledge of beef up the much maligned Prompt Payment Code, the practice remains an acute problem for small businesses, in particular at a time when they are battling for survival as a result of the impact of Covid-19.

Nevertheless, the identity of the new Small Business Commissioner offers some encouragement – Liz Barclay is the former Citizens Advice CEO. For the small business sector, the proof will very much be in the pudding. In the meantime, small business owners have to find a solution to the hardship caused by late payment. How can they manage the costs? Alternative finance can help.

SME late payment and how alternative finance can help

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the coronavirus pandemic, alternative finance facilities such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target regrowth.

Notably, alternative lending is playing a prominent role in government emergency support schemes. A key part of the soon-to-be-closed Coronavirus Business Interruption Loan Scheme, invoice finance and asset finance will be integral to its replacement, the new Recovery Loan Scheme. Invoice finance and asset finance between £1,000 and £10 million per business will be available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Dealing with late payment and SME finance options

While the intention to seriously tackle late payment should always be welcomed, the message from the new Small Business Commissioner is one that small business owners have heard numerous times before. For this reason, they won’t be holding their breath. Until a lasting solution is found, SMEs need to be aware of all the finance options available to them, including the services of alternative lenders.

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