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Invoice finance the solution to SME late payment problems?

While government pronouncements on executive pay and Royal Bank of Scotland bonuses are grabbing the headlines, another important business issue has also raised its head again – the impact of late payment on SMEs. But this is a growing problem that invoice finance can help solve.

A recent survey of businesses in the South East has found that 10% of SMEs are spending more than a quarter of their time chasing outstanding payments. This figure equates to more than a week a month and is an increase on the 6% reported in 2010 and the national average of 9%.

The loss in working days is costing the country an estimated £4 billion and increasing the strain on small businesses, for many of whom cash flow is a major source of difficulty. Raising capital to maintain day-to-day operations has become a challenge for many SMEs that have found mainstream credit lines restricted.

An SME credit facility that can help maintain cash flow and reduce the pressure of late payments is invoice finance, including invoice discounting and factoring. When using invoice finance, the lender involved will usually ensure that the invoice is settled within the specified payment period, helping cash flow and improving relationships with suppliers and customers.

Invoice finance is becoming increasingly popular with SMEs, as these figures show, but it still remains an alternative SME finance product. There is still a lack of awareness of this small business finance facility. However, recent comments from Business Secretary Vince Cable, in which he highlighted alternatives to bank lending, should help push it further into the mainstream.

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

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