Summary
This document is a research paper that examines the relationship between late payments and small business borrowing, based on the latest findings from the Xero Small Business Insights (XSBI) research program. The research combines late payment data with borrowing data from the Bank for International Settlements to quantify the effects of late payments on small business financing. The paper outlines six key findings, including a statistically significant association between late payments and increased borrowing, with small businesses borrowing 1.1% more for each additional day of late payment. The analysis indicates that late payments lead to an estimated additional borrowing of $278.7 billion across five countries. The research also highlights that small businesses tend to borrow from non-bank institutions when faced with late payments, which often charge higher interest rates. Furthermore, the study discusses the implications of these findings for late payment policies and the importance of reducing late payments to alleviate the financial burden on small businesses.
