Many SME entrepreneurs are struggling to stay financially afloat as a result of the corona measures. They are experiencing problems repaying corona debts, which leads to deferment of repayments, taking out new loans and paying suppliers later. Research shows that more than half of the SME entrepreneurs who have applied for coronavirus emergency support see repaying them as an enormous challenge. Almost half of them are taking on new debts to pay off old loans. So far, nothing new.

What is interesting here is the fact that SME entrepreneurs come to traditional banks less and less often, because they often don't get financing there. As a result, they are dependent on alternative and more expensive financiers, such as factoring companies, which currently already provide 27% of all SME loans up to €1 million. This involves additional costs for entrepreneurs who are already struggling.

There is a growing trend where entrepreneurs are looking for alternative forms of capital, such as factoring and payday loans. Entrepreneurs try to close gaps in their finances by, for example, taking out payday loans with high interest rates, making rent arrears and paying suppliers later. In addition, entrepreneurs need extra capital to invest in growth, on top of paying (rising) wages and stocks. Capital-intensive companies in particular have difficulty with this, because they have already invested a lot but have yet to generate turnover. This leads to working capital problems.

Late payments among SMEs can have various effects on the entire economy:

1. Chain disruption: If an SME is unable to pay its suppliers on time due to payment delays, this can lead to supply chain disruptions. Suppliers, in turn, may have problems paying their own suppliers, which in turn leads to delays in production and ultimately reduced availability of goods and services.
2. Bankruptcies: If payment delays persist and SMEs are unable to meet their financial obligations, this can result in bankruptcies. Bankruptcies not only affect the company in question, but also for employees who lose their jobs. This could lead to an increase in the unemployment rate and a decrease in consumer spending, which in turn has a negative impact on other companies in the economy.
3. Reduction in investments and growth: Late payments can lead to financial pressure and liquidity problems for SMEs. This may limit their ability to invest in new projects, expansion or innovation. Fewer investments often also mean less growth, which can slow down overall economic activity.
4. Risk aversion among lenders: As a result of payment delays, lenders, such as banks, may become more reluctant to lend to SMEs. They can sharpen their risk assessment and use stricter criteria when assessing loan applications. This can make it more difficult for SMEs to access finance, which limits growth opportunities.
5. Macroeconomic impact: If a large number of SMEs experience payment delays and financial problems, this could have a wider impact on the economy as a whole. SMEs play a crucial role in many economies, including in creating jobs and contributing to economic growth. A weakening of SMEs can therefore lead to a slowdown in a country's economic growth and recovery.

In short, payment delays among SMEs can lead to supply chain disruptions, bankruptcies, reduced investment and growth, risk aversion among lenders, and even broader macroeconomic consequences. It is therefore important to support and ensure the financial health of SMEs in order to rule out negative effects on the entire chain.