Picture a packaging distributor with a few hundred trade customers and a credit controller who has been in the job for years. The business is invented, but the week is not. On Monday, a long-standing customer asks whether 30-day terms could become 45 for this quarter only. On Wednesday, a second customer pays three-quarters of an invoice and says the rest will follow. By Friday a third has stopped answering the phone and replies only by email. None of these requests is dramatic. Taken one at a time, each is easy to say yes to. Taken together, the distributor has agreed to lend money to three businesses that never completed a loan application.
Why does slower bank lending matter to a supplier?
Because someone has to fund a customer’s working capital, and when the bank steps back, the invoice is the next place to look. EY published its UK Bank Lending Outlook on 1 October 2026. It forecasts that growth in corporate lending, 5.3% in 2025, slows to 2.1% in 2026 before rising to 2.8% in 2027 and 3.9% in 2028. Note what that does and does not say. Lending is still expected to grow. It is the pace of growth that falls, which EY attributes to higher costs and economic uncertainty dampening the appetite to invest. The forecast does not break out small businesses or working capital, so it cannot tell us how any particular customer will fund itself. It does describe the climate: less new external money chasing costlier operations.
If banks expect few losses, where does the risk go?
EY expects banks to write off only 0.17% of non-financial corporate lending in 2026, down fractionally from 0.18% in 2025 and drifting to 0.14% by 2028. Its banking leadership reads the slowdown as a story about demand rather than borrowers failing. That may well be right for banks. They lend against security, impose covenants and can monitor accounts continuously. A supplier has an invoice and a promise. In August 2026 alone, the Insolvency Service recorded 1,946 company insolvencies in England and Wales, and in most formal insolvencies the unsecured creditors, which usually means the suppliers, sit at the back of the queue. The bank’s loss rate and the supplier’s loss experience measure two very different positions, so a low number for one tells you very little about the other.
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How does supplier credit end up funding a customer’s cash flow?
Quietly, and without anyone deciding to. A customer short of cash does not announce it. It stretches the terms of whichever supplier is least likely to object, and that is rarely the one with the sharpest follow-up process. The gap is bridged in small steps: a week here, a part-payment there, an unreturned call. By the time it shows on an aged debtor report, the customer may have been using your credit as an overdraft for weeks. It works because most suppliers treat a late payment as an administrative annoyance rather than as a credit signal. Treat it the other way round. A change in one customer’s pattern against its own history tells you more than any national average can.
What are directors saying about their own cash and costs?
The Institute of Directors (IoD) published its September Directors’ Economic Confidence Index on 1 October, drawn from 650 responses gathered between 11 and 29 September. Confidence in the economy fell to minus 54, while confidence in directors’ own organisations rose to plus 10. Cost expectations stand at plus 79 against a long-run average of plus 67, investment intentions at minus 8 against a long-run plus 5, and headcount expectations at minus 2 against plus 10. The IoD’s Chief Economist, Anna Leach, described firms as running to stand still. From a credit control seat, the picture is of directors protecting margin by spending less on growth and hiring. Cash is being guarded, and delaying a supplier is the easiest way to guard it.
What can the motor finance redress delay teach us about uncertain liabilities?
A live example is the Financial Conduct Authority’s (FCA) motor finance redress scheme. The Upper Tribunal held a case management hearing on 5 and 6 October on challenges brought by four parties to the scheme’s scope, how loss is attributed, the redress methodology and compensatory interest. The scheme is partly suspended, and the main hearing may fall in December 2026 or February 2027, which means the size and timing of the bill will not be settled this year. Most commentary concerns consumers. The commercial lesson concerns the businesses around the lenders. When a large cost of uncertain size sits in the future, exposed businesses often change how they pay long before they say anything publicly. Nothing in the reporting suggests any lender is failing to pay its suppliers, and it would be wrong to suggest otherwise. But a supplier with heavy exposure to a lender, a broker or a dealer group has good reason to review limits, ask about provisioning and watch the payment pattern now, rather than after the judgment.
How should a credit control team respond?
Start with exposure rather than sentiment. List the ten or twenty customers you could least afford to lose money on, and note against each what you know about how they fund themselves. Then set a review trigger based on behaviour, for example a customer paying more than ten days later than its own twelve-month average. When the trigger fires, pick up the phone and ask a direct question about what has changed. Ask for recent management accounts or a short cash flow forecast before agreeing any limit increase or term extension, and put any agreed extension in writing with a firm end date.
Remember too that the Late Payment of Commercial Debts (Interest) Act 1998 gives business creditors a right to statutory interest and fixed compensation on overdue commercial debts. You may never invoice it, but saying that you could changes the conversation. Check the current rates before you quote them. Parliament is also looking at the rules: the Commercial Payments Bill, which includes a 60-day cap on payment terms, completed its report stage in the House of Lords on 15 September and is listed for third reading on 20 October, a date Parliament describes as provisional. It will not change your risk this month, so do not wait for it.
When does a statutory demand or winding up make sense?
Sooner than many suppliers think, but only in the right case. A statutory demand is a formal written demand for a company debt of £750 or more. If the company neither pays nor makes an arrangement within 21 days, the creditor can petition the court for winding up. That is a powerful lever against a customer that is still trading and has simply been ignoring you, because directors understand what a petition does to bank facilities and supplier confidence. It is the wrong tool where the debt is disputed on any arguable ground, because a demand can be set aside and costs awarded against you. In those cases the route is negotiation or litigation. This is general information, not legal advice.
Where a debt is undisputed and a customer is stalling, the sensible timetable is the one you set in advance. Pick the dates now: a call when an invoice is a week overdue, a written final demand a fortnight later, and a decision on commercial debt collection, a statutory demand or litigation by day 60. A supplier who acts at that point gives enforcement something to work with. By day 180 the customer may have moved on, the people you dealt with may have left and, in the worst case, the company may no longer exist.
What is the one change to make this month?
Stop treating payment terms as a statement and start treating them as a loan. Every day beyond terms is credit you have extended without pricing it, approving it or securing it. The businesses that come through a slow-lending year with fewer bad debts will not be the ones with the toughest letters. They will be the ones that noticed the first week of drift, asked the first awkward question and acted on a date rather than a feeling.
If you want to know what is realistically recoverable before an account gets old, including how old an invoice can be, how disputed debts are treated and what happens when a debtor has been liquidated or dissolved, our debt collection FAQ answers those questions in plain English.
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A short conversation early on can prevent months of delay and avoidable cost later.