Prompt payments law failing SMEs, ministers warned
The Government must drop the charade of claiming to be SME-focused when small firms have to wait months for payments from suppliers and are too afraid to charge interest, it has been claimed.
Small businesses are waiting, on average, more than two months for payments from suppliers, while about a quarter have to wait even longer, the Irish Small and Medium Enterprises Association (ISME) said.
It called for current prompt payments laws to be scrapped and repeated its call for a statutory 30-day payments regime for all businesses trading within Ireland with other Irish-based enterprises. "Ministers must stop this charade of being SME-focused while they allow ineffectual prompt payments legislation to continue to strangle small business," ISME chief executive Mark Fielding said.
"The facts are that since the legislation was introduced, SMEs are waiting longer to be paid, they are afraid to charge interest on late payments and the abuse of dominant trading positions is flourishing, despite assertions to the contrary."
ISME's latest credit watch survey of 1044 respondents found that the average payment period for SMEs in the second quarter has slightly improved to 62 days. One quarter are experiencing delays of three months or more, and 5pc are waiting more than 120 days. Late interest is charged by less than 2pc of small businesses, while only 4pc of medium-sized businesses charge it, it found.
"With the deterioration in late payments across the board, cash flow in the entire sector is drying up and this, coupled with the lack of available and affordable credit from the banks, is placing many small businesses at risk," Mr Fielding added.
It comes amid a report that Danske Bank is to sell off 4,000 SME loans as it winds up its retail operations here. Mr Fielding said a small number of ISME's members have been affected by the closure. A spokesman for Danske couldn't comment.
"There's no protection. You take out your loan and that's it. It can be sold on," Mr Fielding said. "Many of these businesses are vulnerable but viable. They are trading, but their debt overhang is killing them." Patricia Callan of the Small Firms Association said some SFA members that had been with Danske are finding it difficult to find an alternative bank. "There is certainly an issue for the Government to tackle," she said.