Small Business Borrowers Need To Protect Against Government's Late Payments

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New research has found that public offices are one of the worst offenders for not paying small business on time, which is leading more small business owners using credit cards to get by.

According to the Federation of Small Business, a many as one in three payments from the public sector being made late even after the Government created a code to help stop late payments becoming a big problem in the private sector during the recession.

The report found that local Government is likely to pay one in four invoices late, and central Government and Government agencies make one in three payments late. Overall, 34% of payments from the private sector are late according to the survey.

Frustratingly, many businesses have had to resort to using their own long and short-term finance in part thanks to Government tardiness. The survey shows that 41% dipped into personal savings and 43% used their overdrafts last year. Worryingly, 21% used a personal credit card. This may be an indication of self-reliance as they encountered a banking sector which refused to lend.

John Wright, national chairman of the FSB says: "The public sector needs to take the lead in more than word alone and set an example that paying late isn't acceptable, as this problem persists in the private sector.

"Small businesses rely on receiving payments within the timescale agreed to maintain cash-flow to ensure the business can run on a day-to-day basis. Late payment is not a new issue, but it has been a particular problem in the past year and it is more important than ever that this worrying practice is brought to an end."

Do not use a credit card to keep open your lines of credit. Talk to a small business adviser about taking out new loans or taking our insurance policies to protect you against tardy payments from both the public and private sector instead of risking your enterprise with risky short-term borrowing.

SOURCE: FSB, 01/02/10

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