London – New research commissioned by American International Group, Inc. (NYSE:AIG) and PrimeRevenue indicates that limited access to working capital finance and inflexible payment terms are having an adverse impact on UK business.
The YouGov poll of UK businesses that provide goods or services to large organisations found that 17 per cent of their revenue is currently tied up in invoices with non-standard payment terms, suggesting that around £29bn* is being withheld from UK plc. Over three quarters (77 per cent) of companies have been asked to accept longer payment terms, with 28 per cent saying the issue has increased in the past year.
Businesses reported that on average 20 per cent of their customers insist on terms longer than the norm. This can have a significant impact on business operations with respondents saying extended payments affect cash flow (55 per cent), require additional administration (33 per cent) and strain client relationships (29 per cent).
And the risk of not providing extended payment terms can be costly. One in five respondents (20 per cent) report that they have lost business after denying customers longer payment terms.
With these business risks in mind AIG and Prime Revenue today launched a new supply chain finance offering for mid-market, non-investment grade companies that could free up significant funding for UK businesses.
Supply Chain Finance from PrimeRevenue and AIG is the product of a partnership between a leading global insurer and the largest working capital finance platform in the world. The solution provides funds that enable suppliers to take early payment less a small discount, while enabling buyers to standardise and potentially lengthen their payment terms. This provides low cost access to working capital on both sides of the transaction.