Summer Slump in Payments Leaves SMEs Struggling for Cash

The summer months can be particularly challenging for small businesses due to the seasonal slowdown in payments. According to research by Purbeck Insurance Services, 35% of SMEs seek business finance purely to maintain working capital to cover wages and keep the lights on.

Michael Moore of Complete Commercial Finance explains that payment approvals often take longer than usual during this time, leaving invoices unpaid for weeks longer than expected. This puts unnecessary pressure on cash flow.

The Government's new Small Business Protections Bill aims to address the issue of late payments by introducing a 60-day payment cap and statutory late payment interest at 8% above the Bank of England base rate.

Moore emphasizes that invoice discounting can provide valuable certainty for businesses experiencing seasonal cash flow fluctuations. This solution allows businesses to unlock the value of unpaid invoices as soon as they are issued, reducing the need for emergency funding.

He advises business owners to review their funding arrangements before they become a concern and encourages them to seek finance from a position of strength rather than looking for emergency funding when cash reserves have already been depleted.