The UK’s 60-day cap could rewrite the economics of payables finance

For years, one of the uncomfortable questions surrounding supply chain finance has been whether the product helps suppliers get paid earlier or simply allows large buyers to pay them later.

The UK’s Commercial Payments Bill could make that distinction much harder to ignore.

The legislation, currently progressing through Parliament, would impose a maximum payment period of 60 days for qualifying private-sector commercial payments. The amended Bill completed its House of Lords committee stage on 21 July, with report stage still to be scheduled. It also strengthens statutory interest and expands the Small Business Commissioner’s role in disputes and poor payment practices.

At first glance, that could look negative for payables finance. If buyers lose the ability to negotiate very long payment terms, there is less working-capital benefit available from extending days payable outstanding and then using a bank to bring supplier payment forward.

That conclusion, however, misses where the product may now be heading.

The 60-day ceiling could weaken one particular use of payables finance while strengthening another. Programmes designed primarily around stretching buyer terms will face more scrutiny. Programmes designed around supplier liquidity, funding-cost arbitrage and predictable cash conversion may become more valuable.

The room for term extension is narrowing

The distinction matters because supplier finance can create two different economic outcomes.

For the supplier, an approved invoice can be converted into cash before its contractual maturity date, generally using the buyer’s stronger credit standing to achieve a lower financing cost.

For the buyer, the programme can also support longer negotiated payment terms, preserving cash for longer before the invoice is settled.

Those objectives can coexist, but they are not the same thing.

The proposed UK regime puts a limit on the second. The amended Bill states that where the purchaser is not a public authority, the maximum contractual payment period is 60 days. Government guidance also proposes statutory interest on overdue commercial debt and stronger enforcement of poor payment practices.

The policy is already dividing businesses according to size.

In consultation results published on 24 July, 73% of micro businesses and 70% of small businesses supported a 60-day maximum. Among large businesses, only 44% agreed while 47% disagreed.

That split is revealing. Smaller suppliers see long terms primarily as a liquidity problem. Larger purchasers are more likely to see payment timing as part of normal working-capital management.

Payables finance sits directly between those positions.

Most invoices are not taking 60 days, but the tail matters

The new ceiling should not be interpreted as evidence that every large UK company is routinely paying suppliers after 60 days.

Department for Business and Trade statistics published in July show that large businesses paid suppliers in a median 32 days during 2025, unchanged from the previous two years. The proportion of invoices paid late declined to 15%, compared with 25% in 2018.

But averages disguise substantial differences.

Manufacturing businesses took a median 45 days to pay and had the highest proportion of invoices paid late by number, at 21%. Across all large businesses, 14% of invoice value was paid after the agreed date during 2025.

There is also a broader balance-sheet picture.

Allianz Trade calculates that UK corporate days payable outstanding stood at 62 days in 2025, against a Western European average of 49 days. Its methodology differs from the government’s invoice-payment statistics, so the two figures should not be treated as directly comparable. The Allianz number nevertheless illustrates how important supplier credit remains within corporate working-capital structures.

Globally, the pressure is moving elsewhere in the cash cycle too.

Allianz estimates that the global cash conversion cycle reached 67 days in 2025, three days above its ten-year average. Inventory now accounts for almost 80% of the cycle as companies hold more stock to protect themselves against tariffs, geopolitical disruption and less predictable supply chains.

That changes the payables-finance equation.

Supplier finance may matter more when inventory ties up more cash

A supplier carrying more raw materials or finished goods has more cash trapped before an invoice is even created.

Once that supplier delivers to a large customer, waiting another 30, 45 or 60 days for payment extends the funding requirement again.

That is where payables finance retains a compelling purpose even if contractual terms become shorter.

A supplier offered payment on day five against an approved 60-day invoice still receives a meaningful liquidity benefit. The buyer does not need a 90-day or 120-day payment term for that financing to be useful.

Indeed, higher inventory requirements may make earlier conversion of receivables increasingly important.

The product therefore starts to look less like a mechanism for manufacturing additional buyer DPO and more like financial infrastructure sitting between procurement and supplier liquidity.

That distinction could become increasingly important to regulators, investors and corporate boards.

Programme design will have to change

The strongest programmes in this environment are unlikely to be those promising buyers another 20 or 30 days of working capital.

Instead, the commercial case moves towards faster invoice approval, broad supplier eligibility, competitive discount rates and reliable access to funding.

Approval speed becomes particularly important.

A nominal 60-day payment term offers less benefit to a supplier if an invoice spends three weeks moving through procurement, dispute and approval processes before it becomes eligible for finance.

The financing clock therefore becomes secondary to the operational clock.

This could favour platforms and banks capable of integrating procurement, invoice approval and financing more closely. It also creates more scope for hybrid structures combining bank-funded supply chain finance with buyer-funded dynamic discounting.

Well-capitalised buyers may prefer to use their own surplus cash to capture early-payment discounts at certain points in the cycle, while relying on external financing when liquidity is better deployed elsewhere.

For suppliers, the relevant question becomes less about whether contractual terms are exceptionally long and more about whether early liquidity is available consistently and at an attractive cost.

Receivables finance does not disappear either

A stricter payment regime also does not eliminate the need for invoice finance and factoring.

Payables programmes generally depend on invoices being approved by the buyer. Suppliers often require liquidity before that approval occurs, across customers that do not offer supplier finance, or against portfolios containing many smaller debtors.

Disputes will continue. Late payments will continue. The government’s own latest figures show that nearly one in six invoices reported by large businesses was still paid late in 2025.

Receivables finance therefore remains complementary rather than redundant.

What may change is the risk profile. More predictable contractual terms, stronger payment reporting and tougher enforcement could improve visibility over debtor behaviour. Factors and receivables lenders may have better information with which to distinguish ordinary payment timing from persistent poor performance.

The product is not disappearing. Its justification is changing

The UK’s proposed 60-day ceiling should therefore not be viewed as an attack on supply chain finance.

It is more accurately a test of what the product is for.

If a programme only works economically because a powerful buyer can move suppliers from 60 days to 90 or 120 days, regulation places obvious pressure on that model.

If it works because suppliers receive cheaper and more predictable liquidity, the underlying proposition survives.

It may even strengthen.

Supply chains in 2026 are carrying more inventory, facing more geopolitical disruption and operating with greater uncertainty around transport, energy and sourcing costs. Businesses need working-capital flexibility even when contractual payment periods shorten.

The result could be a healthier dividing line in payables finance.

Payment terms determine when the buyer should pay. Financing determines whether the supplier wants to wait.

Those two decisions were never supposed to be the same thing.