Is your business facing late payment from a public sector client? Unfortunately, this is becoming an all-too-common occurrence. These late payments, which often exceed the 30-day limit for public sector clients, can significantly strain your cash flow and impact your business. As a result, seeking out alternative financing options for businesses can be necessary to bridge the gap.

Public sector late payment specialists are available to help you claim back the money you’re owed under UK law. You can check your eligibility for a late payment claim right here.

Try our Eligibility Checker now →

In the meantime, our blog today will discuss the variety of alternative financing options for businesses, including the pros and cons of each and who they’re suitable for. This way, you can maintain momentum when faced with late payment.

The Impact of Late Payments on Businesses

We’ll begin by looking at some of the negative effects late payment can have on your business. What begins as a delayed payment will inevitably have a domino effect leading to:

  • Strained relations with suppliers: Late payment from a public sector client can affect your ability to pay suppliers, damaging your reputation with them and potential future suppliers.
  • Cash flow problems: Reduced cash flow can make it difficult to pay your own staff, cover operating costs, and continue to develop and grow your business.
  • Stifled growth: Without access to necessary funds, you may find it difficult to expand or take advantage of new opportunities.

Late Payment Action is here to help! We specialise in helping you claim compensation for late payments from public sector clients. 

Begin the claims process now →

Bridge the Cash Flow Gap with Alternative Financing Options

While Late Payment Action is on hand to get you the compensation you’re entitled to, it’s also useful to stay up-to-date on alternative financing options to address immediate cash flow needs:

Debt Factoring

What it is: Also known as invoice factoring, this process involves selling your unpaid invoices to a factoring company, or factor, at a discount. 

Pro: You receive immediate access to a portion of the invoice value, while the factoring company handles collection from your client. 

Con: There is the potential for the loss of some invoice value.

Who it’s for: Factoring can be an excellent solution for businesses with a steady flow of invoices, particularly those with clients with a history of slow payments.

Peer-to-Peer (P2P) Lending

What it is: Online P2P lending platforms connect businesses with individual investors willing to lend money. 

Pro: P2P lending can offer potentially lower interest rates and faster application processes compared to traditional bank loans. 

Con: P2P lending may require your business to have strong financials before it can be approved.

Who it’s for: This option can be a good fit for businesses with strong financials and a clear growth trajectory. It allows them to potentially secure funding at a competitive rate.

Business Credit Cards

What it is: A business credit card is generally designed for SMEs to make purchases and build business credit while keeping spending separate from personal spending.

Pro: These credit cards can provide a convenient and immediate source of short-term financing for smaller expenses.

Con: The drawback of business credit cards is that they can have high interest rates if not paid in full.

Who it’s for: Business credit cards are best used strategically for emergencies or to cover unexpected costs while you await invoice payments.

Merchant Cash Advances

What it is: This option involves selling a portion of your future sales for an upfront sum of money.

Pro: Merchant cash advances can be a quick solution that doesn’t require a credit score check.

Con: They often come with higher fees compared to other options and the repayment structure can strain your cash flow in the long run.

Who it’s for: This option is common among small businesses who want to get their business up and running quickly.

Government Grants

What it is: Depending on the industry and project, your business may be eligible for a government grant to provide financial assistance. 

Pro: Government grants can be a valuable source of funding. This is particularly the case for businesses in specific sectors or those undertaking innovative projects.

Con: Due to high demand, the application process for government funding can be competitive.

Who it’s for: These grants often target specific sectors or initiatives, such as clean technology, innovation, regional development, or skills training.

How to Choose the Right Option for Your Business

As you’ve seen, certain alternative financing options will suit some businesses more than others. Before deciding on a specific financing option for your business, consider factors such as:

  • Your business’s cash flow requirements: How much funding do you need? How long do you need it for? Your answer can help you make a more informed decision on the right alternative financing option for you.
  • Loan terms and repayment options: Don’t get caught out! Take the time to evaluate interest rates, repayment schedules, and any associated fees before signing anything. You don’t want to create even more cash flow problems down the line.
  • Your business’s ability to repay: Before deciding on a financing alternative, sit down with your accountant and go over your company’s projected future earnings. Your ability to repay is crucial.

Conclusion

Don’t let late payments from public sector clients hinder your business success. You can always explore alternative financing options to keep your business moving forward and bridge the cash flow gap. 

Additionally, remember that Late Payment Action is here to help.

Our goal is to streamline the claims process so you can focus on your business. It’s as simple as:

  1. The first step is to confirm you’re entitled to claim using our Eligibility Checker.
  2. If you’re entitled to compensation, check how much using our Claim Calculator.
  3. Read through our FAQ page for answers to the most common questions about the process, giving you a clear idea of what’s to come.
  4. Finally, begin the claims process, fill in the claims pack, and we’ll take it from there. 

Should you have questions or doubts at any point in the process, our experienced team is always on hand.

Speak to the team →

A pound sign next to a checklistInvoicing Public Sector Clients