Late payment continues to be a major threat to small firms, its impact exacerbated by the pandemic and the failure of regulation to deliver a solution to the problem. As businesses struggle, how can they manage the extra burden of late payment?

According to a new survey from the Federation of Small Businesses, more than 400,000 small firms could collapse in 2022 because of late payment. Similar research from Barclays has also highlighted the scale of the problem, with the bank labelling the practice the single biggest cause of business failure.

Why tackling late payment is more urgent than ever

Of course, late payment by larger organisations is not a new issue for small businesses. The last decade alone is littered with failures to remedy the situation. Most recently, government efforts to legislate against the problem, with the Payment Practice and Performance Regulations, have achieved little, as have moves to beef up the much maligned Prompt Payment Code.

However, the economic impact of the pandemic has made late-payment pain even more acute for small businesses, as have Brexit-related new charges and regulations and the jump in fuel and energy costs. As a result, more and more businesses are feeling the effects of late payment.

So, how can small firms manage the impact of this practice on cashflow? Invoice finance can help.

Late payment and how invoice finance can help

With regard to alternative finance, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic, invoice finance and other alternative lending services 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 recovery and regrowth. Notably, invoice finance is allowing firms to secure capital without putting key business relationships at risk. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the client.

Furthermore, alternative lending is playing a prominent role in the government’s headline emergency support scheme, the Recovery Loan Scheme (open now until the end of June 2022). Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Managing late payment and small business finance options

Given the threat that late payment poses to small firms in 2022 and the failure of previous measures to meaningfully tackle the issue, it is clear that further action is required. However, whether the government takes such steps remains to be seen. In the meantime, businesses have to protect themselves and one way in which they can do this is by making use of all the finance options available to them, including invoice finance.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.