Late payment remains an issue for small businesses as they struggle to stay afloat in the UK’s unpredictable economy. Encouragingly, however, Hilton-Baird Collection Services has found that while the UK’s SMEs are still feeling the pinch, they are adopting a back to basics approach to credit control in a bid to ease the pressures of late payment.

The research, which surveyed 247 business owners during January 2012, found SMEs are taking a more proactive stance in order to stay on top of their credit management and reduce the likelihood of late payment. Set against a backdrop of the challenging economic climate, there has been a significant rise in the use of constant reminding (69 per cent), suspending work and services (47 per cent) and writing to debtors (45 per cent). Other popular credit management strategies include credit insurance (15 per cent), while almost half (47 per cent) are credit checking new customers.

As a result of this back to basics approach, the payment performance of UK businesses improved during the second half of 2011. Businesses are now waiting an average of 17 days beyond their agreed credit terms to be paid by their customers, which is a full five days sooner than in the preceding six months to July 2011. There was also an encouraging fall in the age of respondents’ debtor books, with 66 per cent now classifying less than 10 per cent as more than 90 days old, up from 57 per cent in July.

Although alternative options are available, the situation has been antagonised by the winding down of HM Revenue & Customs’ Time To Pay scheme. Worryingly, only 69 per cent of the one in five applying to defer the repayment of their tax arrears in the second half of 2011 had their applications accepted. This clearly indicates the importance for businesses to be wary as to who they supply goods and services to in the months ahead, particularly given the uncertain economic prospects.

Despite the evidence that some businesses are tackling payment issues head on, there still remain a number of worrying trends. The latest research shows that only 18 per cent of all firms reported no delay in payment in the last six months, though only one in four said they would consider charging interest on late payment in the next six months.

Alex Hilton-Baird, managing director of Hilton-Baird Collection Services, commented: “We are pleased that payment performance is improving. However, late payment is still hotly debated and it is no secret how much it has affected the financial health of UK businesses. It is therefore encouraging to see that the majority are employing a range of different credit management strategies in order to clamp down on late paying customers, something I hope will continue.

“Firms are taking a step in the right direction by utilising the options at their disposal, with five per cent now outsourcing their credit control functions in full, which is up from just one per cent six months ago. This can be a hugely beneficial resource as specialist debt collection agencies can assume the responsibility of chasing customers for payment. While late payment remains a major issue, businesses should do all they can to stay on top of credit management and safeguard their cash flows against its impacts.”

Shawbrook Bank has acquired Singers Asset Finance to extend its secured lending offer to SMEs.

Shawbrook is a specialist savings and lending bank that launched in October 2011 with a commitment to increasing lending to SMEs. The specialist lending teams of both businesses will enable Shawbrook to offer SMEs a greater range of secured lending products.

Singers Asset Finance provides hire purchase and leasing to UK SMEs and the healthcare sector. Singers retains the name and brand as part of the acquisition, enabling both Shawbrook and Singers to continue to operate their relationships and contracts with their existing customers.

Sir George Mathewson, chairman of Shawbrook Bank said, “The acquisition of Singers Asset Finance is an exciting step in Shawbrook’s growth as a savings and lending specialist. Singers is a strong, successful business, and by joining forces we will be extending our offer to SMEs and giving customers access to the experience and knowledge within both of our specialist lending teams. Since we launched Shawbrook Bank we have seen huge demand for loans from SMEs, and by adding asset finance to our lending offer we can help even more small businesses to grow.”

Richard Pyman, chairman and CEO of Singers Asset Finance said, “We knew from the outset that Shawbrook would be a natural match for Singers. Both businesses are focused on making it easier and more straightforward for SMEs to borrow, and we are united in our desire to provide traditional, straightforward lending. Having a strong new owner in Shawbrook Bank marks a new chapter for Singers, and we look forward to working alongside Shawbrook to offer the best possible service for our customers.”

The Chancellor has launched the National Loan Guarantee Scheme (NLGS), helping smaller businesses across the UK (with an annual group turnover of up to £50 million) access cheaper finance.

The Government will provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Around £5 billion in guarantees will be made available in the first tranche.

Participating banks will pass on the entire benefit that they receive from the guarantees to smaller businesses across the UK through cheaper loans. Businesses that take out an NLGS loan will receive a discount of one percentage point compared to the interest rate that they would otherwise have received from that bank outside the scheme.

The banks currently participating in the scheme are: Barclays, Santander, Lloyds and RBS. Aldermore have also agreed, in principle, to join the scheme.

The Chancellor said: “The Government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme. It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates onto businesses.”

The Government is not guaranteeing individual loans to businesses and thus not taking on the credit risk of loans made under the scheme. The banks retain the credit risk and therefore their usual lending and credit parameters will apply.

Experian has launched Experian Business Check, a new, online commercial credit checking service designed specifically for UK small and medium sized firms to help them make better business decisions.

Experian Business Check enables SMEs to access accurate and up-to-date information on the financial health and payment performance of other UK businesses, including limited and non-limited business. It will help businesses to minimise the risk of non-payment, late-payment, commercial identity fraud and exposure to the failure of key customers and suppliers.

Individual checks can be purchased from £13.99.

SMEs using the service can check details of company directors, enabling them to identify disqualified directors. They can also set up instant text or email alerts so that they can be alerted, whenever and wherever they are, to changes in the financial or management status of those businesses monitored.

Max Firth, managing director of Experian’s Business Information Services, commented: “More than 20,000 firms go out of business every year in the UK, leaving a trail of unpaid bills and out-of-pocket creditors. Furthermore, many firms are facing late payment issues, where the average time taken to settle bills is now almost 26 days beyond agreed terms. As a result, many smaller businesses encounter cash-flow problems that can even lead to their own failure.

“Experian’s commercial credit information is relied on by many big companies to minimise commercial credit risk and to enable them to make better, more informed customer decisions. Experian Business Check provides these capabilities in a convenient and affordable manner, so that SMEs can also use high-end business intelligence to limit financial exposure and improve cash-flow.”

Experian Business Check, which provides SMEs with a single score to highlight likely failure rates and payment performance, draws on data from Companies House, Registry Trust Limited, and access to information from Yell and Thomson – the two largest suppliers of non-limited business information. It also includes payment performance data from more than 22 million business-to-business transactions made every month. This information is already used by many of the UK’s largest businesses and commercial lenders to accurately understand commercial credit risk.

As an introductory offer, Experian is giving SMEs a 50 per cent discount on their first Business Check order. To receive the discount, SMEs must type in the code 50% when prompted.

Lending under the Government’s flagship small business lending scheme, the Enterprise Finance Guarantee (EFG), has fallen to another new record low according to independent finance provider Syscap.

The value of loans offered under the EFG scheme has dropped further to £77.8 million in the last quarter (to December 31st) down 24 per cent from £102.8 million during the same period last year.

The Enterprise Finance Guarantee scheme was designed to encourage banks to provide finance to SMEs with a turnover of less than £25 million. Under the EFG scheme the Government guarantees 75 per cent of the value of lending in an individual loan to a business.

Small companies borrowing under the scheme need to pay their bank interest and other charges and the Government an additional fee for using the scheme.

The poor performance of the scheme has prompted the Chancellor to change the focus of the scheme from encouraging banks to lend to the smallest class of companies with a turnover of under £25 million. Instead loans under the scheme are now available to bigger businesses with a turnover of up to £41 million.

Syscap says that opening the scheme to bigger companies may crowd out smaller companies.

Philip White, chief executive of Syscap, explained: “The smaller the company the harder it is for that company to get bank funding. The EFG scheme’s attraction was that it targeted just those smallest companies. Throwing the doors of the scheme open to bigger companies might lead to more lending in total but less lending to the smallest companies.”

“The failure of the EFG scheme combined with the cancellation of Project Merlin raises the question as to when the Government will find a practical way of substantially increasing bank lending to smaller businesses.”

Syscap says that the EFG scheme would have worked better if it had included leasing, the traditional way companies fund business investment and one of the few areas of business funding that is currently growing.

“Allowing lease finance into the EFG scheme would give a major boost to the availability and affordability of leasing,” said White.

“Making lease finance more readily available would mean businesses can make the investments they need now rather than postponing them indefinitely.”