SMEs are being "exploited" by larger organisations, making them wait more than 100 days before being paid and imposing new terms and settlement fees on owners, the FSB alleged.

John Wright, FSB national chairman, said: "Big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result.

"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous."

There is existing legislation which allows small business owners to charge interest on late payments, but many are reluctant to use this for fear of losing contracts with big businesses on which they are often reliant, the organisation said.

Wright added: "At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit."

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