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Why late payment failure puts spotlight on invoice finance

The continued failure to find a solution to the problem of late payment is a major handicap to SME sector growth. New figures show just how serious the issue remains and why raising awareness of invoice finance is essential.

According to the Asset Based Finance Association, SMEs in the UK are owed £67.4 billion in unpaid invoices. The amount represents an increase of 8% over 2014 and a 36% rise over 2011. Small businesses are now waiting for an average of 72 days for payment, compared with 61 days in 2009. Late payment can seriously impact cashflow and a company’s ability to pay bills, such as VAT (the value of overdue VAT payments rose to £2.85 billion in 2015), and fund expansion.

The SME sector has seen a steady stream of white knights ride into town promising to tackle the problem, but not one has been able to turn the rhetoric into reality. Tellingly, one of the most promising developments of recent years with regard to late payment has been the government’s decision to scrap the ban on small businesses raising funds by borrowing against unpaid invoices. The reform is as much an acknowledgment of the important role that invoice finance, and alternative finance as a whole, has to play in providing SME finance as it of the need to finally get to grips with the problem of late payment.

Alternative finance has evolved from the periphery of the SME finance market to take centre stage, and the likes of invoice finance, peer-to-peer lending and crowdfunding are only likely to become more important. According to a new study by the Centre for Economics and Business Research, the alternative finance market is set to reach £10 billion by 2020.

Notably, the research also shows that almost 60% of SMEs still have limited knowledge of alternative finance services, which is a revelation that underlines the importance of raising awareness of what the sector has to offer. The ability to tackle late payment problems should only help to generate take-up among SMEs.

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

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