Banks advise SMEs to use factoring services

29/04/2010

Small businesses are struggling as a result of more than £63 billion on unpaid invoices, claim bankers.

Over the past year, almost three quarters of SMEs have been impacted by late payments, with many resorting to using the services of a factoring company to help maintain cash flow.

The research by the Royal Bank of Scotland and NatWest has discovered that some 235,000 SMEs have been wasting precious time chasing unpaid bills – which is something that can be outsourced to invoice factoring firms.

According to the research, 9 per cent of the SMEs have turned to invoice discounting and 8 per cent have chosen factoring as their preferred solution to the crippling problem.

The banks feel that more small business should sign up to factoring services to help alleviate the stresses and cash flow problems that can arise from late payment.

Despite the concerns, fewer business are as worried now as they were a couple of years ago about the effects of late payment. The percentage of firms that were worried about the impact on cash flow fell from 61 per cent to 26 per cent over the past two years. In addition, only 18 per cent of firms claim their survival is threatened by late payment, compared with 32 per cent in 2008.