Industry Minister Barbara Roche has introduced a Bill to give a statutory right for businesses to claim interest on the late payment of commercial debts.
On the publication of the Late Payment of Commercial Debts (Interest) Bill, she said: “Late payment hits small firms hardest, it stifles growth, disrupts cashflow and ultimately hits profits. Surveys repeatedly show that small firms overwhelmingly support the introduction of a statutory right to interest on late paid commercial debt.”
For the purposes of the legislation, small firms are defined as businesses with no more than 50 full-time employees.
Roche said: “The legislation will give precedence to contractual agreements between businesses. However, provisions are included in the bill to prevent ‘contracting out’ of the legislation by dominant customers setting excessively low rates of interest or long payment times in their contracts.”
“I am keen to prevent the smallest of businesses suffering because they have to borrow overdraft finance to cover their late paid bills at a higher rate of interest than the base rate plus four per cent initially proposed in the Green Paper. In the consultation a persuasive argument was made that the interest rate should reflect the rate at which small firms are charged for agreed overdrafts. The Government will follow the Bank of England’s suggestion of eight per cent.”
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