Regnskab

Accounting

Finansiering af din virksomhed

Financing your business

Vækst din virksomhed

Growing your business

Fakturering

Invoicing

Opstart af virksomhed

Starting your business

Finding funding for your new start-up business can be hard. Here, we walk you through some popular options and how to find them.

They say there are two things in life you can be sure of: death and taxes. We would argue there is actually a third: [starting a business is difficult](https://www.zervant.com/en/blog/how-to-start-a-business-uk/). Getting a business off the ground needs capital, whether that be financial or sweat capital.

However necessary it may seem, being successful isn’t impossible without a hefty startup fund. Let’s begin with a couple of feel-good stories of companies that made it big with the smallest amount of capital behind them.

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## First, a little inspiration

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Just one year before the start of the Second World War, a business was formed in a garage in the small Californian city of Palo Alto. Set up by Bill Hewlett and David Packard, the company that bears their surname had an initial capital of USD 538 ( $10,000 in today’s money).

After merging with Compaq in 2001, the company sold its 51-percent controlling majority share to Tsinghua Unigroup for at least  $2.4 billion in 2015\. At this time, the company was registering net income of over  $5 billion and owned assets of  $103 billion.

Another global success that started from the very bottom is Pete’s Super Submarines, although you may know it better by the name it changed to in 1968: Subway. Three years earlier, Fred DeLuca had borrowed USD 1000 from a friend to start up his own business (around $8,000 in today’s money).

Fred had originally wanted just enough money to afford his medical school tuition – instead, he created a global behemoth. Today, Subway has more than 42,000 locations across 111 countries and can claim to be both the world’s largest single-brand restaurant and largest restaurant operator on the planet.

<figcaption style="box-sizing: inherit; color: rgb(49, 53, 52); font-style: italic; margin-bottom: 1rem; margin-top: 0.25rem;">Financing a new business can be a grind. We’ve rounded up the basic funding routes available.</figcaption>

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## What is business funding?

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Here, “funding” means “cash” – it’s really that simple. A business needs cash to begin trading, in one form or another.

You may think “my business is an online service business, I don’t need cash to start up – I just need my computer!” – but where will you plug your computer in? How do you pay for your internet connection? How did you buy that computer in the first place?

Whatever your business requires becomes a financial liability of your company and needs funding (cash) to run. You can learn more about corporate finances in our [“what is bookkeeping?” article](https://www.zervant.com/en/blog/bookkeeping-basics/).

Funding can be secured in a number of different ways, but it is important to select the right funding for your business. Some are fortunate enough to have money behind them, so are able to fund the business themselves, while others look to family or friends.

More “official” forms of funding can be found in government funds, grants, bank loans or specific companies that choose to invest in small companies they see potential in. It can be a bit of a minefield, which is why we are here to help.

Let’s take a look at the options.

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## Government funding

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Government funding is the first port of call for many start-ups. This is still a very useful avenue and offers a number of more ‘official’ incentives, such as tax credits, 6% start-up loans, regional growth funds and even competitions.

For more info, go to the [government’s official site](https://www.gov.uk/browse/business).

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>There are numerous opportunities with government funding which means finding the specific kind of funding needed for your business is more likely. There are various loans, often with low-interest repayments, and grants which you will not need to pay back.

Tax ‘discounts’ help in that they improve your cash-flow to allow for business growth. Rather than giving you cash, they work by saving you money. Overall, it is in the government’s best interests for your business to succeed – more revenue means more tax!

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>The greatest barrier to pursuing start-up funding from the government is that it can be a laborious task involving numerous meeting, forms and hassle. Further, there could be many strings attached and numerous hoops to jump through for a considerable period of time.

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## Small business grants

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Although government-funded, this is worth a few words on its own.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>There are literally hundreds of different start-up grants available, depending on your industry, location and size of your start-up. Obviously, they are very popular as, unlike a loan, you do not have to pay any of it back.

This means your business does not immediately plunge into the red before you’ve even started.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>There are literally hundreds available!

Some people can be put off by the huge number and it can be tricky finding which grant suits your type of business.

Funnel down your options and [apply for the right loan for your business here](https://www.gov.uk/business-finance-support).

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## Angel Round investment

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An angel investor is one who puts money into your company and takes a chunk of ownership equity in return. In small start-ups, this is often a family member or friend who sees potential in your idea and wants to help out.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>Angel investors typically have cash ready and can therefore get money to a small business very quickly. Further, you don’t have to put up any private assets as a guarantee on the money and there are no interest-laden repayments.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>While this is certainly an option worth looking into, remember the strain on relationships this type of business arrangement can cause if you are to borrow from people you know.

When it comes to companies, be aware that you will lose complete control of your company and may have to move it in a direction you are not entirely comfortable with.

For more information on this type of funding, visit the [angel investment network](https://www.angelinvestmentnetwork.co.uk/) or   or the [UK Business Angels Association](https://www.ukbaa.org.uk/services-for-entrepreneurs/support-and-advice/angel-investment-right-business/).

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## Venture Capital Round

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Now, we are talking serious investment – not just the kind to get a small business off the ground. Venture capital involves private equity firms investing in your company through a series of stages or “rounds”.

In 2019, venture capital investment grew by 44% year-on-year, with more money invested in the UK than in Germany and France combined.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>This kind of investment can bring a huge amount of money in from the very beginning, meaning you can concentrate solely on developing your business. The type of money raised in VC rounds would not be available from the previous methods mentioned.

These firms can also offer valuable relationships, professional advice and a network for your company as it grows.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>VC round funding should definitely not be viewed as a sure thing, as you will need to have many factors in place beforehand, such as networks, a detailed business plan and a mentor to coach you through the process.

It can also get complicated, meaning there is a very good chance of you having to pay for legal help in order to complete deals. VCs can also take a long time to make their decisions and there is always the possibility your company could be undervalued if you choose the wrong investor.

However, if you wish to explore this option then [Startups](https://startups.co.uk/how-does-venture-funding-work/) is a good place to start.

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## Incubators

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Usually located in one place, this is an organisation that helps with workspace rentals, equipment, seeding rounds, training, legal help and advice. Here, you can mix with others in the same boat and share tips, ideas and advice.

There are currently around 200 incubators active in the UK.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>On an everyday level, it means that you have some company and are not stuck in the corner of your bedroom all day. Financially, you could save up to 50% of your start-up costs – such as office space, electricity, printers, etc. – by choosing to set up in an incubator.

You are also more likely to be spotted by an investor, as they tend to keep a close eye on new companies – especially as there are multiple gathered in one place.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>Of course, they are often restricted to large cities, so many not suit everyone. Also, make sure there are no hidden costs when you sign up or that the incubator is due a slice of any future profit. One further disadvantage is that you are reliant on the skills and knowledge of the incubator team that is in place at the time and they may not be up to standard.

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## Debt funding

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This is essentially the opposite of equity financing and involves selling debt instruments to money lenders. Much in the same way that when you want to buy a house, you have to get into debt to buy it and, once that loan is paid off, you own the house.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>Debt-financing means that you do not give up any stake in your company and can remain in complete control. Barclays, Natwest and HSBC all have favourable debt-funding options, while newer alternatives, such as Mettle and MetroBank, are also now competing for business. [Medium.com’s excellent article on which one to choose](https://medium.com/unifimoney/27-things-to-consider-when-choosing-a-new-bank-f88eb07778f7) is worth reading.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>In all honesty, it is unlikely you will be able to walk into a bank and convince them to invest in your start-up business – no matter how good your idea. The simple fact is that start-ups are risky investments and have little or no collateral behind them if things go badly.

The debt also has to be paid back in full, regardless of how the business is faring. As your company is not fool-proof, the interest level on your loan is likely to be high, meaning you end up paying back a lot more money than you borrowed. The typical interest rate is around 8%, so for every £1000 you borrow, you will pay back £1080 before you are debt-free.

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## Crowdfunding

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This is a decent option for companies who want to produce a good rather than a service.

Crowdfunding, as the name suggests, invites people to invest money through a website in return for shares in your company. Websites such as Seedrs and Crowdcube as accessible, easy-to-use and safe, while Kickstarter was an early trendsetter and has even been used as a synonym for crowdfunding in some areas.

Crowdfunding can also be used for specific products. In this case, people invest a certain amount of money towards a set target. Once this has been reached, each investor gets one of the products in question and you keep the rest.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>This allows companies to get their first product off the ground, raises awareness and gains you free word-of-mouth advertising.

If the target isn’t met, those who committed funds do not have to pay up. It also doesn’t cost you anything but can result in excellent marketing and feedback – your investors become your best market. Last year, the average funding per campaign in the UK reached £11,796, with the sector estimated to be worth over £50 million by 2024.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>Crowdfunding is not a guaranteed source of income, on which you can rely. If you don’t meet your target amount, it is very unlikely you will get any cash whatsoever. We would highly recommend against this course of action as your sole source of income.

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## No funding

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<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Pros: </span>Yep, you read that correctly. Some people don’t need any funding for a business, particularly if they provide a service. By saving a little cash, companies can get everything they need in place through having a home office, using public transport, using older equipment they already have and not employing anyone to begin with. You also know exactly how much money is there and maybe more careful if it is yours.

<span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">Cons: </span>Very few people have the large amount of money needed to start a business lying around or in savings. Further, if your company does not succeed, all of your hard-earned cash will be lost. This is not for everyone, so please have a think before deciding whether you need business growth funding.

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Asking for money is never easy. It’s awkward, time-consuming, and you certainly don’t want to upset your clients. But overdue invoices are also dangerous – they risk affecting your cash flow and putting you out of business. Not to mention the fact that you have a right to be paid for the work you’ve done!

But how do you handle such a delicate situation? How do you ensure you get your overdue invoice paid <span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">and</span> keep your clients coming back for more?

<span style="box-sizing: inherit; font-style: inherit;">Whilst there are no silver bullets, there are plenty of steps you can take to help minimise the problem. In this post we’ll look at </span>the best ways to ask clients for late payment<span style="box-sizing: inherit; font-style: inherit;">. We’ve also made some [email scripts ](https://www.zervant.com/en/blog/how-to-ask-clients-for-late-payment/#EmailScript)</span>and [template downloads](https://www.zervant.com/en/blog/late-payment-letter-templates/)<span style="box-sizing: inherit; font-style: inherit;"> ready for you to use, should you need them.</span>

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## Set the tone from the start

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<span style="box-sizing: inherit; font-style: inherit;">Being upfront with your clients about payment can save you hassle further down the line, so it’s best to state your invoicing terms from the off. [UK law](https://www.gov.uk/invoicing-and-taking-payment-from-customers/payment-obligations) says that payment must be received “within 30 days of getting your invoice, or the goods or service”, unless agreed otherwise.</span>

<span style="box-sizing: inherit; font-style: inherit;">But although the default is 30 days, the average payment time for invoices in the UK is currently [more than 38 days](https://ctmfile.com/story/late-payments-is-bad-for-business-yet-27-of-uk-invoices-paid-late). So you may well want to start with shorter terms, especially with your new clients. You could even try asking completely new clients to pay their first invoice in full, before doing the work. </span>

There is no right or wrong answer here, just make sure you’re clear about what you expect.

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## Be proactive

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A common mistake many smaller businesses make is to wait until the invoice is overdue before chasing it. That’s already too late! Ideally you should send the first reminder about a week before the due date. Don’t think of this as pushy – it’s more an effective way to get the ball rolling.

In the best case this first reminder may get your invoice paid early. But if not it will certainly help keep it in your customer’s mind, and it may help you to identify any problems with the invoice early on (which could affect payment time).
<a name="EmailScript" style="box-sizing: inherit; background-color: transparent; color: rgb(0, 180, 194); cursor: pointer;"></a>
<span style="box-sizing: inherit; font-style: inherit; font-weight: inherit; color: rgb(0, 0, 0);">Send another reminder on the day the invoice is due, and if nothing has happened within a week, send another one after that.</span>

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## Create an email script for your reminders

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<span style="box-sizing: inherit; font-style: inherit; font-weight: inherit; color: rgb(0, 0, 0);">As well as the financial aspect, one of the most annoying things about chasing late payment is the amount of time it takes. One way to save time is by having a set of email scripts for your reminders, ready to send out as and when you need them.</span>

<span style="box-sizing: inherit; font-style: inherit; font-weight: inherit; color: rgb(0, 0, 0);">Here’s a few suggestions.</span>

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### 1. A Week Before the Due Date

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Hi [FIRST NAME],

This is just a quick reminder to let you know that payment for invoice #123, which we sent you on June 26th, will be due in a week’s time, on 3rd of July.

Please take a moment to check the invoice, and do let me know if you have any questions.

Regards,
[YOUR NAME]
_

[Send this reminder as an email!](mailto:?subject=Invoice%20Payment%20Reminder&body=Hi%20[FIRST%20NAME],%20This%20is%20just%20a%20quick%20reminder%20to%20let%20you%20know%20that%20payment%20for%20invoice%20%23123,%20which%20we%20sent%20to%20you%20on%20June%2026th,%20will%20be%20due%20in%20a%20week%E2%80%99s%20time,%20on%203rd%20of%20July.%20Please%20take%20a%20moment%20to%20check%20the%20invoice,%20and%20do%20let%20me%20know%20if%20you%20have%20any%20questions.%20Regards,%20[YOUR%20NAME])

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### 2. On the Due Date

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Hi [FIRST NAME],

This is just a quick reminder to let you know that payment for invoice #123, which we sent you on June 26th, is due today. Please pay this as soon as possible.

Let me know if you have any questions, happy to help with whatever you need.

Regards,
[YOUR NAME]
_

[Send this reminder as an email!](mailto:?subject=Invoice%20Payment%20Reminder&body=Hi%20[FIRST%20NAME],%20This%20is%20just%20a%20quick%20reminder%20to%20let%20you%20know%20that%20payment%20for%20invoice%20%23123,%20which%20we%20sent%20you%20on%20June%2026th,%20is%20due%20today.%20Please%20pay%20this%20as%20soon%20as%20possible.%20Let%20me%20know%20if%20you%20have%20any%20questions,%20happy%20to%20help%20with%20whatever%20you%20need.%20Regards,%20[YOUR%20NAME])

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### 3. A Week After the Due Date

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Hi [FIRST NAME],

We have not yet received payment for invoice #123. A payment of £ [XXXX] is now overdue.

I’d really appreciate if you could pay this invoice as soon as possible, and please let me know when you have done so.

If you have any questions then let me know.

Regards,
[YOUR NAME]
_

[Send this reminder as an email!](mailto:?subject=Invoice%20Payment%20Reminder&body=Hi%20[FIRST%20NAME],%20We%20have%20not%20yet%20received%20payment%20for%20invoice%20%23123.%20A%20payment%20of%20%C2%A3%20[XXXX]%20is%20now%20overdue.%20I%E2%80%99d%20really%20appreciate%20if%20you%20could%20pay%20this%20invoice%20as%20soon%20as%20possible,%20and%20please%20let%20me%20know%20when%20you%20have%20done%20so.%20If%20you%20have%20any%20questions%20then%20let%20me%20know.%20Regards,%20[YOUR%20NAME])

If that still feels like a lot of work you can use Zervant to automate the whole process, and set up automatic [payment reminders](https://www.zervant.com/en/payment-reminders/).

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## Give your client a call

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If email reminders aren’t getting your invoice paid then you should also try just giving your client a call. Mistakes do happen – maybe the address was wrong, perhaps your emails ended up in a spam folder…

Sometimes all you need is a quick call to find out what is going on, and to get your invoice paid. Plus, if someone is just stringing you along, it’s easier to come up with excuses via email than on a direct phone call. If you’re still stuck then it’s time to consider [legal action](https://www.zervant.com/en/blog/late-payment-letter-templates/).

Hopefully these pointers help you get started, but be sure to check our [blog](https://www.zervant.com/en/blog/) for more advice on coping with late payment.

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What do you do when a client ignores your requests for payment? What does the law say? Can you charge interest (and if so, how much)? If you run your own business these are key legal questions you need to know the answer to!

To help out we’ve put together a quick intro guide on the topic.

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## What Does the Law Say About Late Payment?

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*   All businesses have a right to charge other business customers and public sector organisations interest on late payments (but not to consumers).
*   Unless agreed otherwise, [the law states](https://www.gov.uk/invoicing-and-taking-payment-from-customers/payment-obligations) that payment <span style="box-sizing: inherit; font-weight: 700; color: rgb(49, 53, 52);">must </span>be received “within 30 days of getting your invoice, or the goods or service” (whichever is later).
*   Some firms, especially larger ones, will demand longer payment terms. If they are longer than 60 days then [they must be fair to both businesses](https://www.gov.uk/late-commercial-payments-interest-debt-recovery).
*   Payment terms can include discounts for early payment.

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## What Happens When a Payment is Late?

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If an invoice is not paid within the agreed payment terms it becomes a late payment. This means:

*   You have a legal right to claim interest (although you don’t have to).
*   The interest that you charge is called ‘statutory interest’.
*   The amount of statutory interest that you can charge is 8% of the invoice total, plus the Bank of England’s base rate for business to business transactions.
*   The base rate is 0.5% as of writing ([check the current base rate](http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp)). So you are able to charge 8.5% interest on late payments.

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## How Do You Calculate Interest?

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This interest is simple interest, not compound. So to work out how much you can charge you need to calculate what the amount of interest would be for a whole year, then work out the daily rate from that.

As an example, if you have a late payment worth £10,000:

*   The annual amount of interest would be £850 (8.5% of £10,000).
*   The daily amount of interest would be £2.33 (£850 divided by the 365 days in a year).
*   After 10 days the amount of interest would be £23.30 (£2.33 x 10), after 30 days it would be £69.90 (£2.33 x 30), and so on.

If numbers are not your thing you might want to use a tool to work this out for you. A quick Google will give you plenty of options. We quite like this calculator by [_Don’t Pay Late_](https://dontpaylate.uk/).

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## To Charge or Not To Charge?

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There are certain pros and cons you need to weigh up when deciding if you want to charge interest on late payments:

*   In certain contexts 8.5% can be a high amount of interest (think, for example, of a savings account). But when it comes to statutory interest, this figure is hardly astronomical. In the example above it only means an extra £2.33 a day.
*   Charging interest is your legal right. And sometimes it’s important to stand your ground, especially when larger firms try to use bullying tactics.
*   But in the long run will it do more harm than good? Will it sour relations with what was a potentially lucrative customer?
*   What do other businesses in your industry do? Is it a common problem or is this an isolated incident you can deal with as a one off? You can ask around on places like [UK Business Forums](https://www.ukbusinessforums.co.uk/) if you’d like advice from people in a similar situation.

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## What if I Want to Charge Interest _And_ I Want to Get Paid?

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Bearing in mind you want your invoice paid and you probably want to keep your customer, this is a delicate matter. How do you manage the two simultaneously?

*   Be practical! Interest will go on increasing every day that the invoice goes unpaid. If you want to get paid it might be best to strike a deal with your customer. For example, if both businesses agree that the invoice will be paid within 7 days then no further interest will be charged.

*   Remember to confirm any revised agreements in writing. Verbal contracts are difficult to prove later on.
*   If you’ve tried this and it doesn’t work you can always opt for for more extreme methods. These include [factoring](https://www.gov.uk/business-finance-explained/invoice-financing) or [winding up a company](https://www.gov.uk/wind-up-a-company-that-owes-you-money/overview). But even if the extra time and money mean the invoice gets paid, it could well be damaging for customer relations.

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## Is There An Official Route?

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The [Prompt Payment Code](http://www.promptpaymentcode.org.uk/) (PPC) is an industry-led, government backed initiative designed to promote a prompt payment culture in business.

*   It encourages fair and reasonable payment terms (an absolute maximum of 60 days, with 30 days as the norm).
*   Almost 2,000 companies have signed the PPC, including more than 100 ‘big’ firms with revenues of over £500 million.
*   However, the scheme is still voluntary. And other than naming and shaming offenders there are not yet any tangible sanctions.

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Financing your business

How to finance a new business | Investors, loans & grants

How To Ask Your Clients For A Late Payment

What You Need to Know About Late Payment Law