British small and medium-sized enterprises (SMEs) are owed more than £500billion in outstanding invoices, an increase of more than 70% in two years, according to the latest Lloyds Bank Commercial Banking Business in Britain research.
The problem is likely to get worse during 2016, with almost a third (30%) of small businesses expecting more of their customers to demand deferred payment terms in the next six months, the research found.
UK SMEs also own almost £2.5trillion of assets that could be used to fund further growth, again a huge 220% increase on 2014, when Lloyds Bank found that small and medium-sized businesses owned a total of £770bn in assets.
Together, the figures suggest that a lack of understanding of alternative funding options is holding British businesses back.
Stephen Everett, head of product and propositions for Lloyds Bank, Global Transaction Banking, said: “Nearly a third of businesses (31%) told us that late payments were affecting their cashflow, and with the amount of money owed them in unpaid invoices, it’s not surprising.
“Yet having this volume of unpaid invoices – just like having thousands tied up in physical assets – needn’t prevent firms from having working capital to invest in growth.
“Different types of funding such as invoice finance or asset-based lending can help unlock the working capital that they need, allowing businesses to grasp more of the opportunities that exist at the moment.
“Failing to take advantage of these types of funding, on the other hand, could be seriously holding them back, affecting not only their growth, but for many firms, potentially stunting the the growth of the entire supply chain beneath them.”
Businesses in Sussex, Surrey, Hampshire and Dorset were owed the most in outsanding invoices (£109,000 on average), while those in Scotland were owed the least (£79,000).
Those in London and Essex owned the most valuable assets (£670,000) but owned the lowest proportion of those assets outright (72%). By contrast, businesses in Bristol, Somerset, Devon and Cornwall owned the least valuable assets (£520,000), but owned the greatest proportion of those assets outright (82%).
Stephen Everett added: “Unless businesses look at ways to unlock the value tied up in these assets, both they and the UK economy overall are likely to be held back.”