Late payment has long been a thorn in the side of small businesses, but the cost of living crisis is making the impact particularly acute, with warnings of large-scale collapses. As these firms battle unprecedented headwinds, how can they manage late payment?

Small businesses have seen another rise in the incidence in the second quarter of the year, following a similar increase in the preceding three months. According to a new study from Barclays, almost a quarter of small and medium-sized firms have seen a rise in late payments, with nearly 20% revealing that they are finding it hard to pay suppliers because of the cost of living crisis.

SME late payment is putting thousands of firms and jobs at risk

This news comes the country steels itself for further economic hardship as a result of the ongoing war in Ukraine and the government’s disastrous Brexit policy. It has been estimated by the Federation of Small Businesses that the rising incidence of late payment could force more than 440,000 small firms out of business.

Late payment has long dogged the small business sector, but in the wake of the pandemic and its impact on supply chains, and in the face of rising energy prices and soaring inflation, these firms are particularly vulnerable. And the failure of these businesses holds significant risk, not least as they employ some 13 million people.

The government has recently signalled its commitment to tackling the issue of late payment, but small business leaders are unlikely to be too excited about the announcements. The small business sector has heard plenty of rhetoric over the years but has seen very little in the way of meaningful action.

Managing late payers and how alternative finance can help

Against this backdrop, it is imperative that small businesses take a proactive approach to managing late payment and this is where invoice finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging market conditions in 2022, services such as 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 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 latest headline emergency support scheme, the Recovery Loan Scheme (open until the end of June 2022). Invoice 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.

Dealing with late payment and small firm finance options

Amid deteriorating market conditions, an upturn in late payment is not much of a surprise but it is the last thing under-pressure small businesses need. It remains to be seen if the government delivers on its pledges and in the meantime, these firms need to protect themselves. One way 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.