It’s time to turn to fintech to solve the late payment problem
The UK is a nation built on small businesses, with SMEs accounting for a staggering 99 per cent of all businesses in the private sector. While many of these businesses thrive, a significant number suffer as a result of late payment, impacting their ability to invest and ultimately grow.
Late payment is a chronic problem for a large number of SMEs, with 37 per cent citing it as the main contributor towards cash flow problems. Recent research by R3, the Association of British Recovery Professionals, found that over a fifth of corporate insolvencies were because of late payment for goods and services.
Evidently, action must be taken to help SME suppliers receive payment on time. Traditional models such as banking and factoring come with endless paperwork for businesses strapped for time and still often result in a 30 day payment period, making it difficult for SMEs to manage their working capital.
Although traditional methods dominate the supply chain finance market, with banks currently controlling around 95 per cent of the market globally, with such limited innovation, the market is ripe for disruption by new alternative finance players.
Businesses that are able to combine deep credit expertise with technological innovation are challenging the status quo. Allowing SMEs to sign up with no personal guarantees, access outstanding invoices immediately and receive payment within a matter of days, not months.
Large corporates are also starting to recognise the value in using alternative finance platforms, such as Crossflow which allows firms to manage their supply chain more effectively.
Such platforms are playing an active role in fuelling business growth stifled by a lack of working capital. Through a reduction in the number of late payments, businesses able to remain solvent continue to provide jobs across the country.
On a broader economic level, according to the FSB if there were zero payment delays in the UK, there would be a significant uplift in gross value added to the UK economy, crucial through the uncertainty of Brexit.
The benefits of opting for alternative finance are unequivocal.
However more must be done to raise awareness levels among large corporates and SMEs alike. The alternative finance sector, in conjunction with regulators and government, must redouble its efforts to drive greater understanding.
It is time for alternative finance seize the moment and make working capital worries a thing of the past.