EC's 'Fair Pay' Directive: The End of 90-Day Payment Terms in Transport? What Does This Mean for Your Business?

The European Commission has presented a groundbreaking draft directive that is expected to revolutionize billing rules in the European road transport industry. The new regulations – informally referred to as the directive 'Fair Pay' – assume the introduction of an absolute, strict deadline for payment of invoices amounting to 30 daysThe regulation is a direct response to the systemic problem of payment backlogs, which for years has decimated small and medium-sized enterprises in the TSL (Transport, Forwarding, Logistics) sector across the European Union. For risk managers, credit information agencies, and credit insurance companies, this means a fundamental reevaluation of models for assessing contractors' payment credibility.

A systemic problem that is killing carriers

To properly assess the importance of the EU initiative, it's important to understand the scale of the problem that European road hauliers have been grappling with for years. In the current market environment, small transport companies – which constitute the vast majority of entities in the TSL industry – operate under chronic pressure on financial liquidity. On the one hand, they incur fixed and high operating costs: fuel, road tolls, rolling stock depreciation, driver salaries, and mandatory insurance. On the other hand, they often wait sixty to ninety days, and in extreme cases even longer, for payment for services rendered.

This mechanism is not accidental. For years, large freight forwarding companies and logistics operators have consciously exploited their negotiating advantage by imposing extended payment terms on subcontractors. In practice, this means that small carriers spend many weeks financing the operations of large players – without any compensation for the capital provided, but with the full risk of the client's insolvency on their side. Given the recurring economic crises, persistent inflationary pressures, and sharp fluctuations in fuel prices, this settlement structure is simply disastrous for many small businesses.

The hard data from the European Commission is alarming: Every year, thousands of small and medium-sized businesses in Europe go bankrupt solely because they are waiting for payment for invoices they have issued.The transport sector is particularly vulnerable in this regard, as the nature of the industry requires upfront costs to be incurred – even before the client decides to settle the debt.

The existing regulations have proven to be insufficient

The EU Directive on combating late payment in commercial transactions, known as Directive 2011/7/EU, was supposed to be a response to this problem over a decade ago. While these regulations introduced mechanisms for charging statutory interest for late payments and lump-sum compensation for debt collection costs, in practice they proved insufficient. A key loophole was the lack of an absolute limit on payment terms in business-to-business (B2B) relationships – the law permitted longer terms to be established contractually if the parties expressly agreed. In reality, however, the "consent" of a small subcontractor was often merely a formal expression of the inability to negotiate with the dominant client.

Newly proposed directive 'Fair Pay' It is intended to definitively close this loophole. The planned 30-day deadline is intended to be absolute and inviolable – with no possibility of extension through contractual provisions in standard commercial transactions in the road transport sector. This represents a fundamental shift in regulatory philosophy: from a "30-day default, but otherwise agreed" approach to a "30-day and not a day more" approach.

How will the new regulations change the face of the TSL industry?

The impact of the directive's implementation will be felt across many levels of the transport and logistics market. Experts point to several key areas of transformation:

Pressure on working capital of large freight forwarders

Large freight forwarding companies and logistics operators, which until now have de facto financed their day-to-day operations at the expense of subcontractors, will face a significant organizational and financial challenge. The need to settle liabilities within just 30 days will force them to acquire additional working capital—whether from banks, the bond market, or through specialized supply chain financing instruments such as reverse factoring or Supply Chain Finance programs.

In an era of relatively high interest rates, such as those prevailing in the eurozone, the cost of obtaining such financing will be felt in companies' financial results. It is estimated that the operating margins of large logistics operators may decline – which, from the perspective of shareholders, will be a significant risk signal, but from the perspective of small subcontractors, is simply a condition for their survival in the market.

Potential market consolidation

The new regulations could become a catalyst for consolidation processes in the logistics intermediaries and freight forwarders segment. Companies with weaker financial structures, which have previously maintained liquidity thanks to extended payment terms to subcontractors, may be unable to adapt to the new legal regime. Their exit from the market or acquisition by stronger players is a realistic scenario that industry analysts should factor into their forecasts.

On the other hand, consolidation can bring systemic benefits: a market dominated by entities with a solid capital base is, by definition, more resilient to shocks and more predictable from the point of view of assessing credit risk.

Automatic sanctions for delays

A key element of the new directive, which gives it a practical enforcement dimension, is the automatic right of the creditor to accrue interest for each day of delay and to claim a lump sum compensation for debt collection costs – without the need to issue an additional demand for payment or prove the damage suffered. This mechanism makes deliberately delaying payments costly for the debtor from the very first day after the deadline is missed.

The Risk Assessment Revolution: New Challenges for the Business Verification Industry

From the perspective of entities dealing with the verification of contractors' credibility, trade receivables insurance and credit risk management – ​​i.e. for the core group of recipients of the EURODEBT.eu platform – the proposed directive opens a completely new chapter in the history of assessing the payment reliability of companies in the TSL sector.

The end of the era of static scoring models

Traditional methods of assessing a company's creditworthiness, based primarily on analysis of annual financial statements, balance sheets, and profitability ratios, will prove simply insufficient in the new legal environment. Annual financial statements have one fundamental flaw: they provide information from the past, without providing insight into the company's current liquidity situation.

The requirement to settle within 30 days will result in the company's ability or inability to settle its liabilities will be a signal available in a much shorter time than beforeThis means that rating agencies, credit information agencies, and business verification platforms will need to invest in real-time liquidity monitoring tools—based on data from court records, payment information exchange systems, and B2B platforms that track actual settlement dates.

DSO indicator as a new basis for assessment

In the new wrodoIn the regulatory environment, the indicator will become particularly important DSO (Days Sales Outstanding), or the average waiting time for receivables to be collected. Companies whose DSO systematically exceeds 30 days in relationships covered by the new directive will clearly signal either violations of regulations by their contractors or their own debt collection problems. In both cases, this will be a red flag for risk analysts.

The indicator will become equally important DPO (Days Payable Outstanding) – the average time it takes to settle its own liabilities. A freight forwarder whose DPO systematically exceeds the statutory 30-day limit risks not only financial penalties but also a sharp decline in its credit rating on EU rating platforms. Trade receivables insurance companies should prepare now to update their contractual clauses and risk portfolio assessment methodologies.

A new standard of due diligence in the TSL sector

For transport and logistics companies seeking secure business partners, the new directive will effectively create a new minimum standard for due diligence. Verification of a potential client or contractor should now include:

• Payment history analysis in the databases of business intelligence agencies and credit information exchange platforms
• DPO indicator assessment based on available financial data and market references
• Payment alert monitoring in real time – especially important in the first months after the directive comes into force, when some companies will have difficulties adapting
• Verification of exposure to concentration risk – assessment of how much of the receivables portfolio is concentrated in one or more large customers
• Checking whether the company is not listed in the debtor registers conducted at national and European level

Perspective for small and medium-sized carriers

For hundreds of thousands of small transport companies operating in the European Union, the new directive is a potentially groundbreaking change that could literally save their businesses. Improved financial liquidity resulting from faster receivables collection will translate into:

• Less dependence on expensive external financing (factoring, working capital loans) to bridge the gap between operating costs and revenues
• Greater ability to settle own liabilities on time – leasing instalments for rolling stock, insurance premiums, employee salaries
• Possibility of more rational planning of investments in fleet modernization and meeting increasingly stringent environmental standardsrodowiskowy (Euro 7)
• Improving your credit scoring, which in turn will facilitate access to financing on more favorable terms

It is worth emphasizing, however, that the directive itself is only the beginning. The key challenge will remain effective enforcement of new regulationsExperience with the implementation of Directive 2011/7/EU shows that even good law can be dead if it is not accompanied by effective mechanisms for oversight and sanctions at the national level. The success of the new regulation will therefore depend largely on the determination of individual Member States in transposing and applying the provisions.

Business Risk Assessment: What to Do Now?

Regardless of how long it will take for the new directive to be formally adopted and enter into force—and given the EU's legislative processes, this could take anywhere from one to several years—market preparations should begin immediately. Below are key recommendations for various groups of entities:

For transport and forwarding companies (as creditors)

• Review and update all existing contracts with contractors regarding payment deadlines – it is worth negotiating now to shorten the deadlines to 30 days, referring to the upcoming regulations
• Implement or intensify monitoring of timely payments for key clients by building your own payment history database
• Secure yourself financially for the transition period – credit lines or factoring agreements as a liquidity buffer
• Consider trade receivables insurance as additional security in the process of adapting the market to new regulations

For large logistics operators and freight forwarders (as debtors)

• Audit internal payment processes and identify bottlenecks that extend the payment cycle
• Consult with banks and financial institutions about the availability of Supply Chain Finance or reverse factoring programs as working capital management tools
• Reserve time and resources to renegotiate your financing terms in the context of increased working capital needs
• Follow the progress of the legislative process and actively participate in industry consultations

For financial institutions and rating agencies

• Start work on updating scoring models for entities from the TSL sector, taking into account new payment indicators as assessment variables
• Build or develop real-time liquidity monitoring tools based on transaction and register data
• Update insurance policies and credit limits for the forwarding and logistics segment, taking into account the transitional risk of the implementation period

Summary: A Paradigm Shift in Payment Risk Management

Proposal for a directive 'Fair Pay' This is one of the most significant regulatory signals the TSL sector has received in recent years from the European Commission. Regardless of the final shape of the adopted regulations, the direction of change is clear: the era of long payment terms as a standard tool for managing working capital by large market players is coming to an end.

For the company verification and credit risk assessment market, this means building new analytical competencies based on real-time data and dynamic scoring models. Those companies that are the first to adapt their methodologies to the new realities will gain a significant competitive advantage – both in terms of the quality of the analyses they provide and the credibility of the recommendations they issue.

For the entire supply chain in Europe, where the transport sector plays an absolutely fundamental role, better protecting the liquidity of small and medium-sized carriers is an investment in systemic stability. It's worth remembering that the bankruptcy of a single small transport company is usually a localized problem. However, mass bankruptcies of tens of thousands of carriers – caused by accumulated payment backlogs – threaten the continuity of goods deliveries to factories, stores, and warehouses across the European Union. This is why this directive, although technically a financial and legal regulation, has a far broader scope than any of its titles might suggest.

EURODEBT.eu Editorial Team will continuously monitor the progress of the legislative process and inform about any significant changes. We recommend that our clients in the financial sector and transportation and logistics companies take preparatory actions now – both in the operational sphere and in terms of reviewing their counterparty risk management policies.