Supply chain finance and extended payment terms

Some large buyers set long payment terms and then offer suppliers a way to be paid sooner, for a fee. Here is how that works, why it worries small suppliers, and what the companies' own payment reports show.

What the payment reports show

From each of the 6,220 large companies whose latest report covers a period ending since May 2025:

2,255 (36%) agreed a payment period longer than 60 days with at least one supplier, 1,848 (30%) agreed 90 days or more, and 600 (10%) agreed 120 days or more.
The typical longest agreed period is 60 days.
465 (7%) say they offer suppliers supply chain finance.
Those 465 take longer to pay on average, a typical 49 days against 30 days for companies that do not offer it, but pay a smaller share of invoices outside their agreed terms: a typical 11% against 16%.

Figures are each company's latest filed report on Check payment practices, as at 3 November 2026. The longest agreed period counts reports giving a figure between 1 and 365 days; 24 reports giving more than a year are left out. "Typical" is the median. How we use the data.

Extended payment terms

Payment terms are the number of days a buyer has to pay after receiving an invoice. Large buyers sometimes stretch them to 90 or 120 days. For the buyer that frees up cash. For a small supplier it means paying staff, materials and tax months before the money for the work arrives.

The law already puts some limits on this. Under the Late Payment of Commercial Debts (Interest) Act 1998, as changed in 2013, statutory interest runs after 60 days between businesses if a longer agreed period is grossly unfair to the supplier, and after 30 days where the buyer is a public authority. Since 2017, the largest companies have had to report their payment terms and performance twice a year under the Reporting on Payment Practices and Performance Regulations 2017, which is where the figures on this site come from.

How supply chain finance works

Supply chain finance, also called reverse factoring, is arranged by the buyer with a bank or other funder:

the supplier sends its invoice and the buyer approves it for payment;
the supplier can choose to be paid straight away by the funder, less a discount or fee;
the buyer pays the funder the full amount when its own payment terms run out.

Because the funder is relying on the large buyer's credit rather than the supplier's, the cost can be lower than the supplier borrowing on its own. The catch is that the supplier pays to receive money sooner, and the scheme can make long payment terms look easier to accept. If the funder withdraws, or the buyer gets into trouble, suppliers are left waiting for the full term.

What Carillion showed

Carillion, one of the UK's largest construction and services companies, went into compulsory liquidation on 15 January 2018. In their joint report on the collapse, the House of Commons Business, Energy and Industrial Strategy and Work and Pensions Committees found that Carillion's standard payment terms for suppliers were 120 days, and that it offered an early payment facility through which suppliers could be paid sooner at a discount. The committees described the government's Prompt Payment Code as "wholly ineffective" (Carillion, HC 769, May 2018).

Long payment terms, supply chain finance and retentions all leave a supplier's money in someone else's hands. That is why they are dealt with together in the reforms below.

What is changing

The government's Time to pay up response said it will cap payment terms between businesses at 60 days with limited exceptions, make the right to statutory interest compulsory, require boards of persistently late paying large companies to explain their performance, and ban cash retentions in construction. The Commercial Payments Bill carrying these measures passed the House of Lords in October 2026 and is now before the House of Commons. None of them is in force yet.

See the data

Slowest payers · Most invoices paid late · Getting slower · Construction payers · Late payment interest calculator

Sources

This page is general information, not legal or financial advice.