SME funding crisis: 40pc of SMEs report cashflow problems

More than four in ten (43 per cent) small- and medium-sized enterprises (SMEs) are taking more than 90 days to pay contract staff.

The number of businesses paying contract staff late has risen by 40 per cent, year-on-year, in the latest sign of the funding crisis hitting the small business sector.

According to new research from embedded finance provider Sonovate, 63 per cent of SMEs said that late payments from clients or customers have had a negative knock-on impact on their ability to pay contract workers on time.

Last year, just half (50 per cent) of SMEs said that late payments impacted their ability to pay contractors on time.

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“Whether it is the intensification of the ‘cost of doing business’ crisis we’ve seen in the past year, or incumbent lenders’ persistently inadequate service to the SME sector, we are still experiencing chaotic cash flow ripples across the economy,” said Richard Prime, co-founder and co-chief executive of Sonovate.

“It is the UK’s growing army of contractors that is increasingly facing the brunt of this, having to wait over three times as long as they should have to get paid for the services they provide. This must change, and quickly.”

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Mainstream lenders have been pulling back their funding over the past year in response to rising interest rates. However, many peer-to-peer lenders and other alternative financing platforms have stepped in to offer competitive rates to creditworthy borrowers.

Sonovate’s Prime noted that SME borrowers have changing needs in the current economic environment, requiring “quick decisions, same-day finance or timesheet and workflow automation”.

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