Answer to small businesses’ struggle for payment across the world lies in mix of fintech and regulation. As one small business owner says “There are some high-street retailers who will pay you on 75-day terms with a 2.5 per cent haircut if you want it earlier. I am staggered this is still allowed. I thought highway robbery was outlawed,”
The European Commission has long tried to tackle the problem in the EU and in 2011 passed the Late Payment Directive. This obliged public authorities to pay for goods and services within 30 days or, in very exceptional circumstances, within 60 days, while businesses had to pay within 60 days. If not, the creditor could charge interest at least 8 per cent above the European Central Bank’s rate, with a minimum of €40 for recovery costs. However, small suppliers are very reluctant to enforce this for fear of losing contracts. A 2018 study by the EU’s executive body found that fewer than 40 per cent of businesses were paid on time. “In some sectors, such as construction, retail, or food, payment delays exceeding 30 days and more are almost systemic,” said the Commission.