Early payment scheme is helping save small businesses from bankruptcy

Over 5,000 small businesses have closed this year due to bankruptcy, promoting local authorities to pay suppliers earlier to help drive liquidity into local economies and relieve financial pressures.

Councils have pushed over £1bn of payments to small businesses using Oxygen’s Finance’s FreePay scheme, a programme that allows for organisations to pay suppliers early without charging them interest rates.   

According to the Office of the Small Business Commissioner, a third of all payments made to small business suppliers are made late which results in cash flow problems.

The Office of National Statistics have also reported over 5,600 businesses closed in the second quarter of this year due to bankruptcy.

Businesses being able to receive faster payments without interest is helping them reduce the need to seek alternative funding from bank loans as interest rates continue to rise.  

In October 2022, UK Finance reported SME debt is also already standing at £204bn.

Launched in 2017, government estimates show FreePay has potentially saved businesses over £1.5m in interest and savings can now be used to fuel business growth and support local jobs. 

Liz Barclay, UK Small Business Commissioner, said: ‘We welcome local authorities’ efforts to accelerate payments to their small suppliers.

‘More than ever, small firms need to be paid as quickly as possible for their work so that they can manage soaring demands on their cash. Financial technology has a leading role to play in managing cashflow and it’s encouraging that larger organisations are using these platforms to support their small suppliers.

‘Quick payments build business confidence without which firms struggle to invest, grow and contribute to the local economy and community. Everyone benefits when payments are quick and fair.’

Photo by Alexander Grey