Backlog of unpaid invoices leading to ‘trade credit crunch’ Iwoca warns

By Oliver Smith on Friday 5 June 2020

Alternative Lending

1 in 4 of those businesses worry they won’t survive into 2021.

Backlog of unpaid invoices leading to ‘trade credit crunch’ Iwoca warns
Image source: Christoph Rieche (right)/Iwoca.

Unpaid invoices are piling up at SMEs across the country with nearly half (40 per cent) facing over £10,000 in unpaid invoices, according to a study by Iwoca.

Furthermore, 1 in 4 of those businesses worry they won’t survive into 2021 as a result of solvency, according to the 537 small businesses that Iwoca surveyed.

“What’s emerging is a concerning game of ‘tug of war’ between small businesses as they look to survive and plan for the future,” said Christoph Rieche, CEO and co-founder of Iwoca.

“Buyers can’t pay their invoices because they don’t have the revenues and sellers are being asked to provide longer payment terms to ease the strain whilst already sitting on a growing backlog of unpaid invoices.”

Obviously Iwoca is presenting its platform as the solution, letting SMEs unlock the cash tied up in their unpaid invoices while at the same time giving buyers the chance to pay up.

As non-essential UK businesses begin opening up, this tension between buyers and suppliers is expected to grow, with the result being that many suppliers will stop offering so-called ‘trade credit’ when selling to buyers, or further limiting the flexibility on payments.

“Coronavirus can and should help trigger a step-change for small businesses to become more efficient, productive and resilient. We believe the first and most obvious change is to make payment terms fairer between suppliers and customers,” added Rieche.

Iwoca recently launched IwocaPay as an intermediary financing platform to help suppliers get paid immediately while buyers can choose payment terms for as long as 90 days.

The lender’s research found that last year 27 per cent of SMEs had asked suppliers for trade credit extensions, while in the last 30 days during the coronavirus crisis that figure had jumped to 41 per cent.

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