The latest research released by Lloyds TSB Commercial Finance has found that 29% of small and medium sized companies (SMEs) reported cash flow problems in the second half of 2008.
70 per cent of these companies cited late payment of invoices by their customers as the number one issue, as a growing number of firms stretch their credit terms and hold onto cash.
Simon Featherstone, managing director of Commercial Finance, said: "The research shows that late payments were already negatively impacting cash flows in the second half of 2008.
"With economic conditions remaining tough, it's vital that advisors and funders work with their clients to examine where the threats lie and look at ways and means of strengthening their cash flow going forward.
"It's no surprise that we're seeing a rise in the number of businesses enquiring about products such as factoring and invoice discounting. These forms of finance enable businesses to release the value held in assets, such as invoices, machinery or stock, to quickly strengthen cash flow.
"The use of debtor insurance policies is also on the increase as businesses look to protect themselves from the worst effects of customer insolvencies."
The figures are taken from Lloyds TSB Commercial's Business in Britain survey which polls over 3,400 UK firms, the majority of which have a turnover under £15million.
The study also found that firms in wholesale and distribution and the construction industries were most likely to suffer from late payments (83 and 80 per cent respectively) whilst companies in the hotel, catering and leisure industries faired comparatively well with just 32 per cent blaming late payment.
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www.ukba.co.uk
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