Government’s £2bn SME funding boost is welcome, but cashflow remains the foundation of business growth
New lending will help thousands of UK businesses access finance, but experts warn borrowing should never become a substitute for getting paid on time.
The government’s £2bn expansion of the Growth Guarantee Scheme has been welcomed as a positive step for UK SMEs, offering thousands of businesses improved access to finance to support investment and growth. However, many business leaders argue that access to funding is only part of the solution.
According to Lynne Darcey Quigley, CEO and founder of Darcey Quigley & Co, improved access to finance is undoubtedly welcome, but many businesses will never realise the full benefit if late payments continue to undermine their cash flow.
“The additional funding is a positive step that will help many businesses invest with greater confidence,” said Lynne. “But finance should enable growth, not compensate for the cashflow pressures created by late payments. Businesses should not have to borrow simply because they are waiting for customers to pay what they owe.”
“The healthiest businesses aren’t necessarily those with the biggest credit facilities, they’re the ones with predictable, reliable cash flow. Access to finance can create opportunities, but cash flow is what keeps businesses operating day to day.”
While lending plays an important role in supporting expansion, many SMEs continue to experience unnecessary financial pressure because invoices remain unpaid long after agreed payment terms.
The consequence is that many otherwise healthy businesses are forced to turn to external finance to bridge cash flow gaps, rather than using it to fund recruitment, investment and growth.
“Businesses should never have to take on additional borrowing simply because they are waiting to be paid for work they’ve already completed,” Lynne continued. “The cheapest source of funding available to any organisation is the money it has already earned. Improving payment practices and reducing debtor days can often do more to strengthen financial resilience than taking on new debt.”
The warning comes at a time when UK businesses continue to face rising operating costs, economic uncertainty and subdued customer demand. While expanding access to finance is an important step, Darcey Quigley & Co argues that tackling late payments and improving payment discipline are equally critical to strengthening business resilience.
“Strong cashflow underpins every major business decision,” Lynne added. “Whether it’s hiring new staff, investing in technology or expanding into new markets, those decisions become much easier when businesses have confidence that payments will arrive when they should.
“The government’s investment will undoubtedly help many SMEs unlock new opportunities. But long-term business resilience won’t be built through borrowing alone. It will be built by creating a business environment where companies are paid fairly, paid promptly and can confidently reinvest the money they’ve already worked hard to earn.”