Late payments cost SMEs £26bn. Speed isn’t the issue
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By Rachel O. Commercial finance writer, 11 years covering invoice finance and ABL. Tested September 2026.
The 42-day wait: What late payment culture can learn From instant payout systems
Forty-two percent. That’s the share of UK small firms hit by late payment right now, according to Enterprise Nation’s Small Business Barometer. The knock-on figure is worse: £26 billion sitting in overdue invoices, doing nothing for the businesses owed it. Not growing stock. Not covering payroll. Just stuck.
Ask anyone in invoice finance how long that’s been the story and you’ll get a shrug. Days sales outstanding has been the industry’s favourite anxiety metric since long before most current account managers were born. What’s changed isn’t the problem. It’s that everywhere else in the economy, waiting has quietly become unacceptable, and SME finance hasn’t caught up.
The 60-day norm nobody questions
Most payment terms in the UK still default to 30 or 60 days, and plenty run longer in practice. A supplier delivers the goods, issues the invoice, and then does the thing every finance director hates doing: waits. Chases. Waits again.
Compare that against the Federal Reserve’s own account of what it built with FedNow. The Kansas City Fed describes a system designed for genuinely instant, 24/7 fund transfers between banks, no overnight batch processing, no weekend gap. That’s not a niche product. That’s now baseline infrastructure for a central bank.
The contrast is almost embarrassing when you put the numbers side by side. A consumer can move money between two banks on a Sunday night in seconds. A business owed £40,000 by a client with 60-day terms cannot. Same country. Same banking rails, largely. Wildly different expectations of speed.
What ‘instant’ actually means outside invoice finance
Consumer fintech settled this argument years ago. When a platform says a payment is instant, it generally means seconds to low minutes, verified and cleared, no manual review unless something flags for fraud. ACI Worldwide’s global research backs this up at scale. Their real-time payments report tracks billions of transactions now settling in real time across dozens of markets, and the trend line only points one direction.
So where do you actually see ‘instant’ engineered as the entire point of a product, not a bolt-on feature? Online gambling, oddly enough, is one of the clearest case studies. Operators compete almost entirely on withdrawal speed because players who wait get suspicious, and suspicious players churn. That competitive pressure produced something invoice finance rarely bothers to build: payout systems where speed is the product, not an afterthought. The clearest example is the instant withdrawal model, where verified withdrawals clear in minutes rather than the three-to-five working days still standard at most high-street banks.
Worth flagging here: none of this is a pitch for gambling as a cash-flow model. It’s a comparison of engineering. Gambling involves risk, and anyone reading this for entertainment rather than payments infrastructure should only ever wager what they can afford to lose. Support is available at BeGambleAware.org if it stops feeling like entertainment.
Why SME finance hasn’t copied the model
Here’s the uncomfortable bit. It’s not that instant settlement is technically impossible in commercial finance. It’s that most of the friction is contractual and procedural, not technological. Credit checks, approval chains, manual invoice verification, reconciliation against purchase orders. Layer by layer, someone decided each step needed a human, and each human needed a day or two.
Compare that to a betting platform’s KYC flow. It runs the identity check once, at onboarding, then never makes the player wait again for routine transactions. Commercial lenders re-run large chunks of that friction on every single funding cycle. No wonder the gap in experienced speed is so wide.
Asset-based lending has actually moved faster than most of the sector on this. A regional MD at Secure Trust Bank Business told the Yorkshire Post that ABL has shifted from a niche turnaround tool into a mainstream option precisely because SMEs now prioritise funding that adapts fast to changing conditions. That’s the same instinct driving instant settlement everywhere else. Businesses aren’t asking for cheaper money anymore. They’re asking for faster money.
Intuit’s own 2025 late payments research found similar pressure building on the US side, with overdue invoices directly constraining hiring and inventory decisions for small firms. This isn’t a UK-only quirk. It’s structural.
The government is nudging, not solving
July’s Growth Guarantee Scheme expansion unlocked a further £6.5 billion in guaranteed lending and raised thresholds for participating lenders. Useful. Not the same thing as fixing settlement speed. A guarantee scheme changes who can access finance. It does nothing for how long they wait once they’ve got it.
UK Finance’s Q1 2026 data showed SME lending up 16% year-on-year, the highest level since 2021. Good headline. But volume growth and settlement speed are two entirely different problems, and only one of them gets discussed at industry conferences.
Purbeck’s research on personal guarantee-backed lending adds a sharper edge here. The average PG-backed SME loan now sits near £180,000, up 16% on the year. That’s real personal exposure sitting behind slow-moving finance. An owner who’s put their home against a facility deserves a faster answer than 42 days of chasing an invoice.
What actually changes this
Three things move the needle, and none require new legislation.
First, lenders could adopt continuous verification instead of re-running full checks on every drawdown. Second, invoice platforms could integrate directly with accounting software for real-time confirmation rather than manual matching, something several fintech partnerships (Simply Asset Finance’s tie-up with NatWest’s Lombard arm being a recent example) are quietly building toward. Third, and hardest to sell internally: someone senior has to decide that a 24-hour turnaround is the new unacceptable baseline, the way three-day bank transfers became unacceptable a decade ago.
None of that is glamorous. It’s plumbing. But plumbing is exactly what fixed instant payments in every other part of the economy, and there’s no obvious reason commercial finance gets to be the exception forever.
For more on how lenders are adapting funding structures around speed and flexibility, see recent coverage on the Business Money news page, and on how government-backed schemes are reshaping access to finance, the piece on the Forum of Private Business’s response to the late payment announcement is worth a read.
Frequently asked questions
Why do UK small businesses still face 60-day payment terms? Most terms default to 30 or 60 days because that’s what large buyers negotiate and smaller suppliers rarely have the leverage to push back. Enterprise Nation’s Barometer shows 42% of SMEs affected, with £26bn tied up as a direct result.
Does asset-based lending settle faster than traditional bank finance? Often, yes. ABL ties funding to existing assets like invoices or stock, which can shorten underwriting versus a full credit application. It won’t match real-time consumer payments, but it typically beats standard commercial loan timelines.
What is FedNow and why does it matter for UK finance? FedNow is the US Federal Reserve’s instant payment rail, settling transfers in seconds around the clock. It matters here because it proves central banks can build genuinely real-time infrastructure, raising the bar for what ‘fast’ should mean everywhere.
Is a personal guarantee required for most SME loans? Not universally, but it’s common for unsecured or higher-risk facilities. Purbeck’s research puts the average PG-backed loan near £180,000, meaning owners often carry real personal risk behind commercial borrowing decisions.
Will the Growth Guarantee Scheme fix late payment culture? No. It expands access to guaranteed lending, unlocking a further £6.5bn, but it doesn’t address settlement speed once finance is approved. Access and speed are separate problems, and only the first one is being tackled directly.