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Are new government rules the solution to SME late payment?

What to make of the news that the government is set to roll out fresh measures to tackle the scourge that is SME late payment? Jaded business owners aren’t likely to hold out too much hope. What else can they do?

There is plenty of data to show the impact of late payment – the latest research reveals that SMEs are owned on average an estimated £22,000, with the problem causing a £2.5 billion drag on the overall economy.

Perhaps this is why the soon-to-be-published new rules from the government to combat the practice of late payment, which can be catastrophic for small businesses, are attracting so much attention.

What do the new late payment rules look like?

According to reports, the government is set to expand the powers of the Small Business Commissioner, give small businesses greater access to advice on negotiating better payment terms and using digital tech to improve systems, and introduce new legislation relating to payment performance reporting obligations.

Certainly, that such steps are being taken and talked up in advance is encouraging, but there is a sizeable elephant in the room – the struggle against late payment is littered with false dawns. This is why the problem remains so acute, with larger firms able to ignore the incentives and infrastructure in place to improve conditions.

Late payment and how invoice finance can help

All eyes will be on the new measures when they’re announced, but it’s unlikely that small business owners be holding their breath and they certainly won’t be putting all their eggs in this one basket. And this underlines the importance of other solutions.

One of which is invoice finance.

Services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses in a funding climate characterised by prolonged caution from traditional lenders. Indeed, the issue has returned amid highly challenging market conditions, with 65% more SMEs experiencing difficulty in accessing finance from high-street banks in August 2023, compared to a year earlier.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping smaller businesses survive and target recovery, stability and growth. In particular, invoice finance is allowing firms to secure capital without putting key business relationships are risk. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the client.

Critically, recent research has shown that invoice finance is the highest ranked alternative finance facility, with its role in supporting cashflow key, and that more than 50% of small businesses are looking to use finance to achieve growth in 2023.

SME finance options for managing late payment

Another chapter in the story of late payment is unfolding, but will it be a memorable one? Or one more damp squib like many that have gone before that? Time will tell. In the meantime, it is vital that small businesses are aware of all the ways that they can help manage the impact of this practice. This includes invoice finance.

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

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