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Late payment reform is needed. But funding should be part of the answer.

Published 7 June 2026 · 8 min read · By Juno Funding

The UK is right to challenge poor payment behaviour. But the answer should not only be a legal cap on payment terms. Funding needs to be part of the debate.

Direct answer

Late payment damages smaller suppliers, drains management time and turns customers into unofficial borrowers. The Commercial Payments Bill, introduced to Parliament in May 2026, addresses this directly.

But a blunt cap on payment terms is only part of the solution. The more useful answer is to combine fair payment rules with better funding options — so suppliers who want cash sooner can get it, and buyers who genuinely need longer to pay can fund that need properly instead of pushing the strain down the supply chain.

That means bringing invoice finance, supplier finance, trade finance, working capital facilities and carefully structured extended-terms products into the conversation. Funding is not a workaround for bad behaviour. Used properly, it is how payment timing can be managed without making the weakest business carry all the pressure.

Quick summary

The Commercial Payments Bill was introduced to Parliament on 19 May 2026.
The Bill proposes maximum payment terms of 60 days, with strictly limited exemptions, and 30 days where the purchaser is a public authority.
The Government response said the 60-day limit would start no earlier than 2027, with an appropriate transition period.
The policy aim is sound: stop larger customers using smaller suppliers as free working capital.
The commercial risk is that a blunt cap could remove payment terms as a legitimate competitive lever where terms are freely agreed, properly priced and properly funded.
The missing piece is funding design. If a supplier wants to be paid sooner, invoice finance or supplier finance may help. If a buyer wants to pay later, it may need a working capital facility, trade finance, an extended-terms facility or a B2B BNPL-style product.
The real issue is not whether every invoice says 30, 60 or 90 days. The real issue is who carries the cash burden, whether they chose it, whether it is priced, and whether it is funded properly.

The business problem

Late payment is not a minor admin issue. For many SMEs, it affects wages, supplier payments, VAT, stock purchases, confidence and growth. The Government estimates late payments cost the UK economy £11 billion per year and are linked to 38 UK businesses closing every day.

But payment terms are not always the same thing as late payment. A customer paying 90 days late against a 30-day agreement is poor payment behaviour. A customer and supplier agreeing 90-day terms upfront is a different issue — it may still be unfair if the supplier had no real choice, but it requires a different response.

That distinction matters because funding can support a fair agreed term, but it should not be used to disguise abuse.

What is changing?

The Commercial Payments Bill was introduced to Parliament on 19 May 2026. The key proposed measures include:

a maximum payment term of 60 days for relevant business-to-business payments, subject to limited exemptions
a 30-day maximum where the purchaser is a public authority
contract terms that do not comply being void, with a 30-day payment term implied instead
mandatory statutory interest on late payments at 8% above the Bank of England base rate
a right to a fixed sum where a purchaser raises a dispute late or without enough information
stronger powers for the Small Business Commissioner to investigate, adjudicate and penalise poor payment practices
new reporting and board-level scrutiny requirements for larger businesses
a proposed ban on retention payments in construction contracts

Limited exemptions are proposed where both parties are large companies, where the purchaser is the smaller party, or where goods or services are of a type where longer terms are commercially standard.

Why the reform makes sense

When a large customer pays slowly, the supplier effectively funds the customer. The supplier has already paid staff, bought materials, paid VAT and used finance — while waiting for cash the customer could have released earlier but chose not to.

Long payment terms are especially difficult for suppliers that are young or undercapitalised, growing quickly, low margin, exposed to one or two large customers, or paying staff weekly or monthly. In those cases, late payment can stop a business taking work, investing, hiring or surviving a difficult month.

The uncomfortable question

A hard cap also removes a legitimate competitive tool in some situations.

Imagine two suppliers bidding for the same customer. Supplier A can offer 30-day terms because it has limited working capital. Supplier B can offer 90-day terms because it has invoice finance in place, understands the cost and has priced it into the margin. Some customers will choose Supplier B — not because the product is better, but because the payment terms are more useful.

That is a competitive lever. It is not automatically abusive. The real question is whether the supplier has genuinely chosen to offer those terms and funded the gap, or whether the buyer has imposed those terms because the supplier had no real choice.

Where funding changes the debate

Without funding, the supplier often has only two options: accept the buyer’s terms and suffer the cash strain, or refuse the work. With the right funding, there are more options.

The supplier can offer terms, but use invoice finance or supplier finance to bring cash forward. The buyer can preserve cash timing, but use its own working capital facility or extended-terms product to fund the gap honestly. That is more commercial than pretending payment delay is free.

If the supplier wants to get paid sooner

A supplier that wants faster cash may use invoice finance or receivables finance. The business raises an invoice and receives an advance from a funder before the customer pays. This can help with wages, supplier payments, stock purchases, VAT timing, seasonal peaks and taking larger orders.

Supplier finance or supply chain finance can also help — usually where the buyer, supplier and funder are connected through an approved invoice or payment programme. The supplier may choose to receive cash earlier at a small discount, while the buyer keeps its payment timing.

The important point is choice. A supplier using funding voluntarily to support growth is in a different position from a supplier forced to fund a customer for free.

If the buyer wants to pay later

A buyer may have a genuine reason to want longer cash timing — holding stock, waiting for onward sales, managing project milestones, importing goods or dealing with seasonal peaks. But if the buyer needs longer to pay, the honest answer is usually funding, not pressure on suppliers.

Options may include a working capital facility, revolving credit facility, trade finance, stock funding, supply chain finance programme, extended-terms facility, or a B2B BNPL-style product where a funder pays the supplier and the buyer repays later.

The principle is the same regardless of product: if the buyer benefits from longer payment timing, the buyer should fund that benefit.

When longer terms are fair and when they are not

Longer terms are more defensible where both parties understand the terms before the contract is agreed, the terms are not imposed by a stronger party, the cost of waiting for payment is priced into the deal, and the buyer pays exactly when agreed.

Longer terms become abusive when used to shift working capital pressure onto a supplier that has no real choice — large buyers imposing 90 or 120-day terms on smaller suppliers, late disputes used as a delay tactic, suppliers afraid to claim statutory interest, or buyers using supplier credit because they have not funded their own cash cycle.

What SMEs should do now

SMEs should review their current customer payment terms, identify which customers regularly pay late, check whether long terms are priced into margin, and consider whether invoice finance, supplier finance or another working capital facility could improve cash timing.

A business with weak credit control will still have a cash problem under a 60-day regime. A business with poor margins will still have a cash problem even if it gets paid faster. Funding can help, but it cannot repair a broken commercial model.

What buyers should do now

Buyers should review supplier terms, payment systems and dispute processes, and ask whether they have been relying on supplier credit to fund their own working capital. If a buyer needs longer cash timing, it should consider funding — a revolving credit facility, trade finance line, supply chain finance programme or stock funding structure — rather than pushing the cost onto suppliers.

Costs, risks and watch outs

Funding is useful, but it is not free. Invoice finance, supplier finance, trade finance, extended-terms products and revolving facilities may involve service fees, discount charges, arrangement fees, monitoring requirements, security over assets, personal guarantees and reporting obligations.

Good funding creates room to act. Badly matched funding simply moves pressure to a different place.

Final practical summary

Late payment reform is needed. The current position has allowed too many large customers to use smaller suppliers as a source of cheap working capital.

But payment terms are also part of commercial negotiation. In some situations, longer terms are not abuse. They are a priced, funded and deliberate part of the deal.

That is why funding should be part of the debate. Suppliers who want cash sooner may be able to use invoice finance or supplier finance. Buyers who want to pay later may need their own working capital funding rather than pushing the cost onto suppliers.

The real issue is not whether every invoice is paid on 30, 60 or 90 days. The real issue is whether the business carrying the cash burden has chosen it, priced it and funded it properly.

Sources and further reading

This article reflects current Juno Funding editorial. Funding products, rates and lender appetite change frequently — figures are indicative only and should not be treated as advice.