Despite the efforts of the Small Business Commissioner, late payment is still costing small business billions and causing thousands of firms to close. How can under-press business leaders manage the problem while safeguarding cash flow?

How much is late payment costing small businesses in 2026?

When it comes to late payment, is it a case of one step forward, two steps back? Maybe. Because while steps are being taken to address the issue, the problem is getting worse, with firms complaining of an upturn in clients taking longer to pay rather than an improvement in the situation.

According to the Office of the Small Business Commissioner, it helped small businesses recover more than £1 billion in outstanding late payments in the first half of 2026. At the same time, the Commercial Payments Bill is moving through parliament with the goal of establishing what the government has labelled one of the toughest legal framework on late payment. It includes a 60-payment cap, mandatory interest and expansion of the Commissioner’s powers, including to issue multi-million-pound fines.

This sounds impressive, like muscles are finally being flexed, yet a new study from Century Business Finance, based on official government data, puts the amount owed to small business in late payments at a staggering £26 billion.

What does this level of debt mean for small businesses? According to government research, late payment is forcing 38 firms out of business every day. This is an extraordinary figure that leaves little doubt as to the scale of the problem. Data from the latest Bibby Financial Services SME Confidence Tracker puts the average amount owed in overdue payments to SMEs at £72,000, while research from Howden revealed that nearly one in three SMEs spend more than six hours per month chasing late invoices.

How alternative lenders can help small firms manage late payment

While the latest figures on late payment are hardly surprising, they still sting. The pressure on small businesses has rarely been more acute, with the latest spike in fuel and energy costs threatening to push many over the edge. As such, late payment is a hammer blow.

However, the problem isn’t unsurmountable: access to finance is crucial to managing the impact of late payment on working capital. Yet even here small business face a significant barrier, with traditional banks continuing to be cautious with regard to small firm lending. This is where alternative lenders can help.

In response to this squeeze on lending, alternative finance has become into a vital lifeline for small firms. Solutions such as invoice finance, asset finance and peer-to-peer lending are filling the funding gap, offering speed, affordability and tailored support.

In particular in relation to late payment, invoice finance is allowing businesses 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.

Notably, the Growth Guarantee Scheme is providing a wide range of finance facilities to smaller firms, including invoice finance, and there have been calls for the initiative to be expanded significantly to help smaller businesses struggling to access finance. Such development offers further proof that alternative lenders are increasing filling the small business funding gap.

Small business finance options for dealing with overdue payments

If the tide is going turn for small businesses, it is vital that late payment is properly addressed. The work of the Small Business Commissioner and the progress of the Commercial Payments Bills offer encouragement, but small business leaders won’t be hanging out the bunting just yet. Previous efforts to tackle the problem have come to little.

This is why it is important that key decision-makers in the small business sector are aware of all the solutions for managing late payment, including the role that invoice finance can play in helping them deal with the practice.

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