The demise of Carillion shines a spotlight on the unfortunate fact that when a major firm enters liquidation, there can be serious implications for a multitude of smaller firms throughout a network of interconnected supply chains.  Even for firms that follow good practice by ensuring they are not too reliant on one large customer and ensure that they keep on top of their sales ledger, delays in payment and loss of business can have cashflow consequences.

Right now, UK banks and finance providers are working closely with the government to make sure the impact of the Carillion liquidation on SMEs in the supply chain is understood and managed in a way that best supports those in need of assistance. Lenders are contacting customers and, where appropriate, are putting in place emergency measures, including overdraft extensions, payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track.

More widely, UK Finance would always encourage firms that are presented with unforeseen cash flow issues to discuss the situation with their bank and other finance providers as soon as possible. Twenty UK banks are signed up to the Standards of Lending Practice for business customers that ensures that those suffering temporary financial difficulties can access the support they need.  In addition, UK Finance Members that provide invoice finance and asset based lending meet a range of commitments set out in the IFABL Standards Framework.

These early discussions of the situation with their bank and other finance providers are essential to ensure they can arrange the right package of support, which might include an extension of working capital facilities or a loan repayment ?holiday?.  In some cases, it may be possible to release cash tied up in other assets, by negotiating earlier payments from other customers for instance, or other types of funding might be available such as invoice finance.

A point that cannot be stressed enough is that it's vitally important for an affected firm not to delay payment to its own creditors without discussing and agreeing this with them first.  Failure to do this may act as a warning sign impacting on the company's eligibility for accessing trade credit in the future.

Of course, replacing the failed institution with other contracts will be front of mind for many firms.  That itself may require further funding, but if the business is good and the customer reliable, this will be seen as a positive by any finance provider, provided the overall business is viable.

A helpful guide to the full range of finance available to businesses has been produced by the British Business Bank and the ICAEW, in conjunction with UK Finance and other bodies - this can be found at www.thebusinessfinanceguide.co.uk