More than half of SMEs are owed money, with a total of £225bn outstanding in late payments. As recent headlines about Tesco payment practices have brought this issue into focus, it is clear that many SMEs look to small business loans to assist cash flow.
According to a survey by Zurich of 600 SMEs reported by SME Insider, 67% of businesses report that late payment is the biggest cause for companies going into insolvency.
The amounts owed by creditors can be significant. Around one in five (20%) of the businesses surveyed said they were owed £25,000 or more, while one in ten said they were waiting for payments of over £100,000.
SME financing is a pressing problem for small businesses; 41% say late payments place significant pressure on their cash flow and 49% think the government is not doing enough to help.
Since the Tesco scandal, there have been gestures towards addressing the problem. A small business commissioner has been mooted, and from April large companies will be required to disclose details of their payment practices.
The Federation of Small Businesses is also promoting a voluntary Prompt Payment Code, which enforces a 30-day payment term as standard with a 60-day limit, but many firms will still rely on SME business loans to smooth their finances.
Jason Eatock, head of SME at Zurich, said: “We have been warned about a ‘cocktail of threats’ to the economy, and small businesses will need all the capital at their disposal to weather this potential storm.”
“In an uncertain economic climate, it is imperative that SMEs receive the support and guidance they need to adequately address the central concerns threatening the viability of their businesses.”
Does your company need SME funding? Why not talk to us about how we can help support your business?