SMEs in Europe forced to take loans due to missing payment

By Puja Sharma

For 62% of Europe’s SMEs, delayed and unpredictable cashflow is the biggest challenge their business currently faces, while a massive 54% have had to take out a loan due to missing and delayed payments. Yet, despite this, just 37% of managers within European SMEs know what a payment rail is and how it works.

European small and medium enterprises (SMEs) are suffering from significant payment issues, but lack a thorough understanding of the processes involved, new research from Banking-as-a-Service (BaaS) provider Vodeno has revealed.

The company commissioned an independent survey among 2,004 senior decision-makers in SMEs across the UK (504), Belgium (500), France (500), and the Netherlands (500). It found that just 37% of respondents understand what a payment rail is and how it works.

Only 10% of SMEs said that payments are processed instantly, while 11% said that the process happens within the hour. Most commonly, (35%) international payments take between two and three days to reach SMEs, with 11% waiting between four and six days, and 4% waiting between one and two weeks.

The long processing times for payments are causing major problems. More than half (52%) of the SMEs surveyed have failed to meet commitments due to slow payment processing, while even more (54%) have been forced to take out a loan as a result of missing payments that disrupted cash flow.

According to Vodeno’s research, the majority (62%) reported that delayed and unpredictable cash flow is the biggest challenge their business currently faces. The same number (62%) said that costly foreign exchange rate fluctuations contribute to a significant drain on their resources.

Looking ahead, the vast majority (68%) intend to adopt real-time payment processing capabilities in the next 12 months, with 62% saying their SME must urgently modernise its payment processing capabilities.

Tom Bentley, CCO of Vodeno, said: “Long settlement times, delayed transactions and a lack of transparency in the payments space can cause headaches for businesses – particularly small and medium enterprises (SMEs) who typically have fewer reserves to draw upon when disruptions occur. Our research shows that these organisations rank missing payments amongst their most significant challenges, with many taking drastic measures to stay afloat.”

In the current macroeconomic climate, cash flow can mean the difference between survival and insolvency, and unpredictable payment processing is the single biggest disruption to business operations. Banking-as-a-Service (BaaS) offers innovations, better solutions, and the ability to make real-time payments a reality for more businesses.

he further added, “Our technology automatically identifies the most appropriate payment rail for any given transaction, offering the most cost-effective and fastest settlement to our clients.”

Key highlights

• Around 54% have been forced to take out a loan as a result of missing and delayed payments
• Over 62% contend that delayed and unpredictable cashflow is the biggest challenge their business currently faces
• About 35% claimed that payments take between two and three days to reach their business
• Banking-as-a-Service (BaaS) offers innovations, better solutions, and the ability to make real-time payments a reality for more businesses.