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Late payment issues exacerbate for 27% of SMEs and close to 1 in 3 are finding it harder to access finance

Posted by Todd Davison on Aug 22, 2019 10:14:00 AM

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      • Late payment problems have worsened for 27% of UK SMEs[i] according to research conducted by Purbeck Insurance Services, the UK’s only insurance provider to offer Personal Guarantee insurance.   29% are experiencing worsening cashflow problems and 30% of UK SMEs are finding access to finance has become harder in the past twelve months.  The findings have been revealed as the UK Government confirms it is proposing new measures to stamp down on late payments to small business.[ii]

        While concerns over the economic uncertainty have deteriorated over the past year for 67% of the small business owners surveyed, for 60%, exchange volatility has made their business harder. 

        Todd Davison, Director of Purbeck Insurance Services said: “We welcome the Government’s new proposals which include fines for larger businesses who pay their small business suppliers late and reforms to the Prompt Payment Code.  Late payment has a huge impact on cashflow – and poor cashflow kills businesses.   Small businesses have simply lacked the muscle to make their larger customers pay on time and big businesses have used this to their advantage – we hope these measures will shift the balance of power.

        “Access to funding is also major challenge for smaller businesses deemed to be a bigger risk to traditional lenders – this is despite a Government initiative to ease the issue through the Bank Referral Scheme[iii].  When funding becomes a problem, cashflow dries up and late payment increases, creating a vicious circle where SMEs aren’t paid so stall payments themselves. However there are an increasing number of options available outside of traditional lenders so it’s vital they access expert advice to work out which finance solution is right for their business.

        “In some cases business directors may face the uncomfortable prospect of taking a Personal Guarantee to secure a loan.  However the risk to their personal assets can be mitigated through Personal Guarantee insurance.  It is also possible to negotiate the terms of the Personal Guarantee so that the risk can be shared with other company directors and the amount of the Personal Guarantee can be reduced. 

        “Seeking professional support and allowing time to shop for the right finance deal is vital.  Fundamentally business directors need to understand exactly what any new finance deal entails, the risks involved and how those risks can be mitigated.”

        What’s got harder for SMEs over the past year

        Securing finance/investment for the business

        Better

        14%

         

        Stayed the same

        56%

         

        Worse

        30%

         

         

         

        Late payment

        Better

        12%

         

        Stayed the same

        61%

         

        Worse

        27%

         

         

         

        Managing cashflow

        Better

        18%

         

        Stayed the same

        53%

         

        Worse

        29%

         

         

         

         Uncertainty about the economy

        Better

        4%

         

        Stayed the same

        29%

         

        Worse

        67%

         

         

         

        Winning customers

        Better

        22%

         

        Stayed the same

        52%

         

        Worse

        26%

         

         

         

        Retaining customers

        Better

        22%

         

        Stayed the same

        51%

         

        Worse

        27%

         

         

         

        Threat of competitors

        Better

        10%

         

        Stayed the same

        54%

         

        Worse

        36%

         

         

         

        Exchange rate volatility

        Better

        14%

         

        Stayed the same

        27%

         

        Worse

        59%

         

         

         

        Source: Purbeck Insurance Services based on a Censuswide Survey of 500 owners and directors of UK SMEs

        [i] 500 SMEs surveyed by Censuswide, March 2019

        [ii] https://www.gov.uk/government/news/broad-new-measures-to-ensure-small-businesses-get-paid-on-time?utm_source=e46d54d9-d632-4cb2-a6d8-589c97c56c69&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

        [iii] https://www.gov.uk/government/statistics/bank-referral-scheme-august-2018/ https://www.growthbusiness.co.uk/why-the-bank-referral-scheme-for-sme-lending-should-be-scrapped-2556520/

         

        [i] 500 SMEs surveyed by Censuswide, March 2019

         

Topics: #pgi, #personalguarantee, #personalguaranteeinsurance, #commercial finance, #bankruptcy

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