At least one fifth of UK corporate insolvencies in the past year were caused by late payment or the insolvency of another company according to new research by insolvency body R3.*
During the past twelve months
- 23% of insolvencies were caused by late payment for goods or services
- 20% were caused by the failure of a supplier or customer
Those who attended our recent lunches will have heard our finance expert Bob Blackshaw review a number of finance and lending options, and of course factoring can play a role in hedging risk of late payment. However, Bob warned that “contract terms should be carefully reviewed”.
As a live example, BCR have just been appointed on a case where a struggling company had successfully sought finance to keep their outdoor furniture business going in spite of a plethora of problems. They fought to survive the higher price of imports post Brexit but then were threatened again by the failure of one of their biggest customers. The final straw arrived when their invoice discounter decided to minimise their risk and withdraw their facility.
BCR Director Nick West who was appointed on the case commented “We often see the domino effect when a viable business gets into difficulty following the failure of a major customer. But in this case the withdrawal of the factoring facility dealt the final blow.”
For guidance and advice on any aspect of finance or support for struggling businesses do not hesitate to contact the team at BCR
*Full survey R3 22/08/2016. Previous research conducted by R3 found that 6% of UK businesses, equivalent to 113,000 companies, were creditors in an insolvency procedure last year.