Late payments send small businesses to the wall
By clamping down on credit, Britain’s newly cautious banks are making collapse almost inevitable for many small to medium enterprise (SMEs) who need a financial cushion now, more than ever, as suppliers and customers struggle to pay bills as the economic downturn bites.
Small businesses in Britain, which employ over half of the private sector workforce and annually generate some 3 trillion pounds, typically depend on loans for working capital to tide them over during lean spells.
The latest research from the Bankers’ Automated Clearing Service (Bacs), which processes direct debits for banks, showed a sharp rise in overdue payments, up 40 percent to 25.9 billion pounds last year from 18.6 billion in 2007.
Bacs, which found that the national average for outstanding payments increased 25 percent to 38,000 pounds in 2008, said SMEs waited an average of 41.5 days beyond agreed payment dates for invoices to be settled as firms — especially those in the manufacturing and service industries — struggled with cash flow problems.
With state-sponsored support schemes failing to deliver cash where it’s needed will dwindling bank lending continue to put Britain’s small firms in danger?