EU plans for 30-day payment period: Financing costs rise for small businesses

EU plans for 30-day payment period: Financing costs rise for small businesses

According to a report by www.tagesschau.de,

The German economy is resisting the EU Commission's plans to introduce a uniform payment period of 30 days for all commercial transactions. Critics, including the German Chamber of Commerce and Industry (DIHK) and the German Trade Association (HDE), warn of rising financing costs, especially for small companies. The current standard deadline for business transactions is 60 days, although individual agreements are possible.

The EU Commission's plans aim to combat late payments and ensure that small and medium-sized companies do not get into financial difficulties. The Federal Minister of Justice expressed concerns that rigid deadlines do not do justice to the different circumstances and leave the economy too little room for contractual freedom. The German trade association warns against the rigid requirements and emphasizes that agreeing on a longer payment period for the retailer is essential for goods that remain in the store or in the warehouse for a longer period of time, as this can save high financing costs.

As a financial expert, I see the potential impact on the market and the financial industry. A uniform payment period of 30 days could put a strain on the liquidity situation of small and medium-sized companies. Short payment terms would force companies to frequently finance the purchase of goods and the resulting liquidity gaps would often have to be covered by loans. This could lead to rising financing costs and weigh on economic activity.

In addition, the rigid requirements could limit companies' flexibility and cause them to be confronted with higher costs for purchasing the goods. The introduction of a uniform payment term should therefore be carefully considered in order to ensure the financial stability of companies and avoid negative effects on the market.