Most small businesses need two things to succeed – access to funding and regular payment. Funding allows businesses to expand and pursue their business idea. At the same time, when small businesses have few initial customers, late payment (or even worse – non payment) can be a significant, if not catastrophic issue.
With this in mind news this week brought both good and not so good news for small business owners.
The good news is that according to a report by the British Bankers` Association, net lending to businesses increased by £2.5 billion in September and that lending to small and medium sized businesses was stable. This represents a significant improvement in lending opportunities for new start business and a marked difference from the recent times of economic turmoil.
I blogged recently on the challenges small businesses face in keeping cash flow under control and need to have robust procedures in place to communicate with clients who are late in making payment. The not so good news reported by The Bank of England is that late payment is now a significant problem for many small businesses. It further notes, in a new report, that larger customers are seeking longer payment terms from small suppliers, and where early payment is offered an overall discount is being sought. Clearly this places great pressure on the working capital that small businesses need to run their business.
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