A report by Bibby financial services says that only 2% of SME’s have cash to invest in their business. One of the reasons is that late payments from customers have increased dramatically since 2009. This has led firms with cash to invest dropping from 20% to the 2% figure.
Big business (as always) is front and centre on the squeeze on SME’s and being the worst at paying creditors on time. This is causing problems in cash flow and means that a lot of SME’s have to turn to unsustainable sources of finance such as credit cards.
The EU implemented the late payment directive early this year but it is estimated that there is still £30bn in outstanding debt.
Cash flow for SME’s has always been one of the biggest issues to overcome and it affects the whole chain in business. Instead of being able to run a business and grow there are times when business owners have to fight just to stay alive. The fact that credit has tightened has meant that a lot of businesses have to rely on prompt invoice payments even more than ever. UK SME’s make up a huge part of the economy. The fact that the problems are increasing does not paint a positive picture for the recovery going forward.
While businesses have had to trim the fat and expense, borrowing included, they still need to have good access to finance to help alleviate problems such as this and it is why the pressure is on the banks to increase lending.
