Cash-flow problems threatening to cripple SMEs warns Yorkshire Bank

WEST Midlands SMEs face an average seven-week wait for invoices to be paid, according to new statistics.

Yorkshire and Clydesdale Banks, which collated the data, said this not only placed a strain on cash flow it could also threaten the survival of hundreds of SMEs across the region.

The banks, which have ring-fenced £100m for cash flow finance from their recently launched £1bn Business Expansion Fund, said it was vital SMEs received full support.

Often referred to as “cash flow finance”, invoice finance allows businesses to access up to 85% of an invoice’s value as soon as it is issued, rather than  wait for it to be settled.

In the last year, the banks said they had seen businesses increasingly looking to strengthen their own invoicing and credit control procedures using invoice finance and credit protection products.

It said despite best efforts, many firms were still concerned about the threat of late payments. Its research revealed that one in 10 small businesses believed they would be forced to drastically restructure their business or even face closure if their customers took 90 days to pay invoices.

Firms most at risk from late payment of bills are often those most affected by the economic downturn, such as construction companies and those with shorter credit periods from their suppliers such as fuel providers.   

Brian Colquhoun, Regional Director, Yorkshire and Clydesdale Banks for the Midlands, said: “Underlining our enduring commitment to the invoice finance market, this £100m of additional funding will provide real support for many businesses.

“Late payments can put immense pressure on small businesses as cash flow dries up, leading to pressure on their ability to pay their own bills.

“Providing an invoice finance service which suits new and existing customers is a key part of our support for UK businesses, particularly those which are working harder than ever to compete in some very challenging economic conditions.”

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