Budget proposal: Sole traders’ income as part of positive credit register and action on excessive payment terms

In its small business package, the Government is promising improvements to business-to-business (B2B) payment terms and micro-enterprises’ access to finance.

On 2 Sep., Petteri Orpo’s Government presented its budget proposal. One part of the budget negotiations was a package for small businesses.

Suomen Yrittäjät, the Finnish SME association, considers as positive developments the Government’s planned action to improve compliance with the Payment Terms Act, develop the positive credit register, and improve micro-enterprises’ access to finance. Suomen Yrittäjät has firmly emphasized all of these in its advocacy.

“These are needed quickly to help business owners in dire straits,” says Juhana Brotherus, a Vice President and the Chief Economist at Suomen Yrittäjät.

In its small business package, the Government wants to ensure timely B2B payments. Under the Payment Terms Act, payment terms on business-to-business invoices may only exceed 30 days if both parties have expressly agreed.

Suomen Yrittäjät has repeatedly stressed that problems with invoice payment terms can put smaller businesses, in particular, into difficulties. A survey conducted by Suomen Yrittäjät found that almost 60% of SMEs said that their 30-day-plus payment terms had not been agreed in the statutory manner.

“In particular, big companies stretch payment terms beyond what the law allows. The way it’s done in Finland is a large company simply tells a small business owner that they’ll get their money later,” says Tiina Toivonen, Legal Affairs Manager at Suomen Yrittäjät, the Finnish SME association.

“The situation has even driven companies into bankruptcy. That’s why it’s important that the Government is clearly willing to end this illegal activity and help small business owners get the money they’re owed in time.

The Government package now states that the Government will investigate methods to enhance compliance with the Payment Terms Act through agency oversight, as Suomen Yrittäjät has proposed.

Changes to credit register

The launch of the positive credit register in April last year has caused problems for sole traders. As early as the preparatory stage of the Positive Credit Data Act, Suomen Yrittäjät pointed out that the register was likely to have a negative impact on sole traders.

Sole traders’ incomes are not entered in the credit register, which has led to many of them getting an automatic rejection, such as when applying for a credit card or hire-purchase, even though they have good credit scores. The Government’s small business package now states that the positive credit register will be expanded to include sole traders.

“It’s excellent that the position of sole traders with regard to the positive credit register is now being put right. The current situation has been unreasonable for many solo entrepreneurs, as the lender considers the business owner uncreditworthy simply because the credit register doesn’t show the business owner’s income,” Toivonen of Suomen Yrittäjät says.

The Government’s package also promises improvements to micro-entrepreneurs’ access to finance. In addition, it will investigate ways to ease companies transfers across generations and to new owners to secure continuation of business.

Also read How Suomen Yrittäjät commented on the budget proposal

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