What is Statutory Interest and Statutory Commercial Interest?

Statutory interest and statutory commercial interest are legal instruments available to creditors when payment is overdue. They compensate the creditor for the loss of the payment and discourage late payment.

The standard statutory interest rate applies to all monetary claims in non-commercial situations where no separate interest has been agreed. This rate is typically lower and is set periodically by central bank reference rates.

The statutory commercial interest rate applies specifically to commercial transactions — agreements where both parties act in the course of their business. This rate is substantially higher and has risen considerably in recent years following central bank rate increases. It applies automatically once the payment period expires, even without a formal notice or a contractual provision.

The standard payment period for commercial transactions is 30 days. Contractually longer periods can be agreed, but excessively long terms can be challenged as unreasonable. Under the EU Late Payment Directive, public authorities generally face a maximum payment period of 30 or 60 days.

For SMBs, knowledge of statutory commercial interest is relevant in two situations: as a creditor seeking to enforce rights against a slow-paying customer, and as a debtor understanding the financial risk of paying suppliers late.

In practice, many businesses do not claim statutory commercial interest even when entitled to it. The discomfort of raising interest charges with a customer often outweighs the financial claim. However, on large invoices and extended arrears, the accumulated amount can be substantial and worth pursuing.

When a customer pays late, you are entitled to statutory commercial interest without needing to negotiate it separately. At high rates and on significant invoice values, this can become a meaningful financial claim worth including in payment negotiations or formal collection proceedings.

Conversely, if your business routinely pays suppliers late, you face a real exposure to interest claims. Tracking invoice due dates is not just cash flow management — it is risk management. A contract management system that monitors payment deadlines helps quantify and control this exposure.