By Daniel Hunter

Much has been made of the potential increased export activity has as a catalyst for economic growth, but variances in cross-border credit terms offered to businesses are holding small to medium-sized enterprises (SMEs) back, according to research released by Bibby Financial Services.

This has led the invoice finance provider to call for a harder line on those companies that evade the Late Payment of Commercial Debts Regulations 2013.

Businesses trading within the European Union are expected to adhere to the EU’s Late Payment of Commercial Debts Regulations 2013, which were introduced in March this year. According to the new measures, payment must not take longer than 60 days unless both parties agree and the extension isn’t grossly unfair.

Data from Bibby Financial Services has revealed that German exporters are the least likely to offer credit terms to customers, with just 21 per cent of these businesses offering regular credit. This is compared to the 76 per cent of SMEs in the UK that offer credit terms to export customers, and 54 per cent of small businesses in the US.

Bibby Financial Services surveyed SMEs across Europe, USA and Asia in Spring 2013. With in-country experts available to help exporters understand and access the funding they need, in the form of invoice finance, Bibby Financial Services commissioned this research to provide insight into market issues that businesses face. It revealed:

· Although credit terms are offered less frequently in Germany, the average length of credit is longer than in many countries
· Of those German SMEs that do offer credit to export customers, 31 per cent offer 90 day terms
· This is in contrast to the 12 per cent of UK firms and 16 per cent of US businesses that offer 90 day credit terms
· The most common length of credit terms offered by exporters is 30 days — this is offered by 62 per cent of UK SME exporters and 68 per cent of US SME exporters

“There are some huge discrepancies when it comes to the amount and length of credit available in different countries, which can cause uncertainty and payment delays for businesses. If you are exporting to one country and offering 90 day terms, yet importing from another and being expected to pay within 30 days, there is the potential for some serious cash flow issues, particularly for smaller businesses. There needs to be tighter controls over cross-border payments to aid international business growth.” said Simon Featherstone, Global Chief Executive at Bibby Financial Services.

“According to our research the EU’s Late Payment of Commercial Debts Directive has yet to have an impact on day-to-day business life. The EU needs to take a harder line on businesses that don’t meet the regulations, and should increase the financial penalties these businesses can incur. Standardised and fair credit available across Europe would make a huge difference to cash flow for SMEs, and would encourage exports across the board,” continued Mr Featherstone.

“We’ve had feedback from our customers that differing credit terms around the world are holding back their business growth. However this can be avoided by following a few simple guidelines.”

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