Working capital depends on how fast customers pay and how trade is financed. The EU caps business payment terms at 60 days unless expressly agreed and gives statutory interest of at least the reference rate plus eight points, and the UK applies 8% over base rate. Letters of credit remain the main secured payment method, and the UK now recognises electronic bills of lading and other trade documents.
Payment terms and late payment
Across the EU, payment terms between businesses should not exceed 60 days unless expressly agreed and not grossly unfair, statutory interest is at least the reference rate plus eight percentage points, and creditors can claim a fixed EUR 40 for recovery costs. In the UK, if no date is agreed, payment is late after 30 days; agreed terms should usually be within 60 days; and statutory interest is 8% over Bank of England base rate.
These rules matter for supplier finance programmes. Extending supplier terms to free cash can conflict with these limits, and lenders and auditors will look closely at the substance of the arrangement.12345
Letters of credit and digital trade documents
A letter of credit shifts payment risk from the buyer to a bank. US government guidance notes that a credit is irrevocable unless it says otherwise and that banks deal only in documents, not goods, so presenting documents that match the credit exactly is what gets the exporter paid.
Since 20 September 2023, the UK Electronic Trade Documents Act has allowed bills of lading, bills of exchange, warehouse receipts and similar documents to exist electronically with the same effect as paper, provided a reliable system is used. This makes faster, paperless presentation possible under English-law trade finance.6789
| Market | Default or maximum term | Statutory interest | Source |
|---|---|---|---|
| EU (Germany, France) | 60 days unless expressly agreed and not grossly unfair | Reference rate plus at least 8 points; EUR 40 recovery cost | EUR-Lex, Directive 2011/7/EU |
| United Kingdom | 30 days if none agreed; agreed terms usually within 60 days | 8% plus Bank of England base rate | GOV.UK |
Decisions to make
- Are standard supplier terms longer than 60 days in the EU or UK?14Longer terms must be expressly agreed and fair or they risk challenge and statutory interest claims.
- Does the export need bank-backed payment security?67A letter of credit protects the seller, but payment depends on presenting compliant documents.
- Can trade documents be issued electronically under English law?89The 2023 Act gives electronic documents paper-equivalent effect if system criteria are met.
Documents usually needed
- Standard terms of purchase and sale with payment terms
- Letter of credit application and the credit itself
- Commercial invoice, bill of lading, insurance certificate and other presentation documents
- Supplier finance programme agreement
- Credit insurance policy where receivables are insured
Common mistakes
- Imposing long payment terms on EU suppliers without express agreement
- Presenting documents with small discrepancies against the credit
- Assuming an electronic bill of lading works under laws other than English law
- Ignoring statutory interest when collecting overdue receivables
Questions businesses ask
Can I claim interest on a late-paying UK business customer?
Yes. Unless the contract sets a different rate, statutory interest is 8% plus the Bank of England base rate.5
Is a letter of credit revocable?
US guidance states that it is irrevocable unless its conditions state otherwise.6
What this guide does not yet confirm
These points need checking with a qualified local professional before you rely on them.
- The ICC Uniform Customs and Practice for Documentary Credits (UCP 600) could not yet be checked, so its rules, such as examination periods, are not stated here.
- The IFRS supplier finance disclosure amendments to IAS 7 and IFRS 7 could not yet be checked on the IFRS Foundation site and are not covered.
- The status of the EU proposal to replace the Late Payment Directive with a regulation was not confirmed.
- India's MSME payment rules, export proceeds realisation periods and Gulf, Singapore and US payment term rules were not researched.
- UK fixed debt recovery sums were not confirmed.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
Under the EU Late Payment Directive, Member States must ensure that a contractual payment period between businesses does not exceed 60 calendar days unless expressly agreed otherwise and not grossly unfair to the creditor. Directive 2011/7/EU, Article 3(5); applies to commercial transactions in Member States such as Germany and France as transposed nationally.
Statutory interest for late payment under the EU Late Payment Directive is at least the reference rate plus eight percentage points. Directive 2011/7/EU, Article 2(6).
Where late payment interest is due under the EU Late Payment Directive, the creditor is entitled to a minimum fixed sum of EUR 40 for recovery costs without a reminder. Directive 2011/7/EU, Article 6(1).
In the UK, if no payment date is agreed a commercial payment is late 30 days after the customer receives the invoice or the goods or service, and an agreed payment date should usually be within 60 days for business transactions unless longer terms are fair to both sides. Late Payment of Commercial Debts (Interest) Act 1998 regime as explained on GOV.UK; 30 days applies to public authorities.
Statutory interest on late business-to-business payments in the UK is 8% plus the Bank of England base rate, unless the contract sets a different rate. Business-to-business transactions; the statutory rate cannot be replaced by a lower rate in contracts with public authorities.
US export finance guidance states that a letter of credit is irrevocable unless its conditions state otherwise. International Trade Administration guidance; the governing ICC rules incorporated into a credit could not yet be checked.
In letter of credit transactions, banks deal in documents only, not goods. International Trade Administration guidance; discrepancies between documents and the credit terms can therefore block payment.
The UK Electronic Trade Documents Act 2023 applies to paper trade documents such as bills of exchange, promissory notes, bills of lading, ship's delivery orders, warehouse receipts and cargo insurance certificates, and came into force on 20 September 2023. Section 1(1) and (2); covers documents whose possession is required by law or custom to claim performance.
Under the Electronic Trade Documents Act 2023, an electronic trade document can be possessed, indorsed and transferred, and has the same effect as the equivalent paper trade document. Section 3(1) and (2); the document must meet the reliable-system criteria in section 2, which were not reviewed.
Questions on this topic
9 statements on working capital and trade finance
