Why Interest May Be in the Best Interest of Your Business
28 July, 2026
It is a truism in business administration that almost all business entities – right from the small sole trader through to the multinational corporation – need to devote considerable time to generating new business as well as effectively servicing existing client needs. Those elements work in tandem, to help grow the business and to then maintain that customer base.
Cashflow is the lifeblood of any business. Time spent chasing late or unpaid invoices is time spent in a less-than-optimal way. It neither brings in new business nor helps to service existing clients. Whilst it is a necessary task, it can be time consuming and draining.
Unfortunately, late payment or non-payment is often an all too familiar feature of doing business. When economies are strained, the problem tends to be magnified. That applies at the local, national, or international level.
It may be a statement of the obvious to say that overdue debts can have a serious impact on cashflow – essentially, they constrict the flow of that cash ‘lifeblood’.
Interest is an age-old way of dealing with the problem. But to work effectively, it needs to be properly incorporated into the business plan and enforced.
At the contractual level, a claim for interest needs to be properly and clearly incorporated into the terms of business – and for any small business that does not have formal terms of business (not recommended), at the very least an interest clause ought to be included on the face of the quote or invoice. That sounds straightforward but sometimes fails through a lack of clarity. Broadly speaking, a claim for interest should be clear, precise, and calculable.
That means identifying some fundamentals: What is interest being claimed against (and is it simple interest or compounded interest)? What is the rate of interest? If it is by reference to an external source, such as a default bank rate, is that rate clearly advertised and updated frequently enough? From what date does it apply (i.e. what is the trigger for interest?), and for what period does the claim apply? Is the amount of the interest charge readily calculable, and when is it recoverable (in other words, when does it accrue - a disparity between daily accruals and monthly / quarterly accruals can be an issue).
Getting those components right can make for an effective and enforceable claim for interest, whether that be business-to-business or business-to-customer. Broadhurst LLC will be happy to review your contractual documents and advise or revise where clarity is needed.
Legislative framework
In some jurisdictions there are specific pieces of legislation that make provision for interest – for example in England & Wales the Late Payment of Commercial Debts (Interest) Act 1998 – or that control excessive rates of interest (historically sometimes referred to as ‘usury’).
That is a layer of legislative control that may need to be taken into account. Whilst legislation does not change often, it can provide a ‘baseline’ rate of interest that might be acceptable in a given jurisdiction. When it does change, contractual documents may need to be adjusted to keep within a reasonable distance of the baseline (a rate of interest that is considerably higher or lower than the ‘baseline’ will be either challenged or ineffective).
Whilst there is no equivalent statute in the Cayman Islands, if proceedings reach the door of a Court, there is likely to be another level of statutory provision to consider.
Where payment cannot be resolved commercially, the Court provides mechanisms for recovering both the outstanding debt and, where appropriate, interest – whether contractually agreed or not.
Once court proceedings become necessary, in jurisdictions such as the Cayman Islands, the Judicature Act (2021 Revision – in the latest guise) empowers the Grand Court to award interest, at its discretion, and the Grand Court Rules put that into effect.
However, case authorities show that interest cannot be assumed to be an automatic entitlement even when pleaded.
Clear contractual provisions arguably remain the most reliable way of reducing uncertainty and strengthening a claim for interest should any debt recovery or other dispute reach the door of the Court.
Interest claims may sometimes be treated as an afterthought or even overlooked entirely, but they can play a fairly crucial role in both litigation and settlement negotiations. For businesses, interest really should be (and should remain) a matter of interest from the outset.
Prevention is better than cure
Nobody sends an invoice hoping to spend the next six months chasing it.
Clear contracts, consistently enforced payment terms, and properly drafted interest provisions are all relatively simple measures that can prevent significant disputes later. Interest rate clauses quietly demonstrate a level of professionalism, set clear expectations from the outset, and arguably place any business in a better position if recovery action ultimately becomes necessary.
Interest should not be viewed simply as an additional amount that may be claimed at the end of a dispute. Used properly, it is part of good commercial risk management, encouraging prompt payment while protecting businesses from the financial consequences of unnecessary delay.
Broadhurst LLC regularly advises international businesses on drafting robust commercial agreements, recovering outstanding debts and enforcing contractual rights. If you would like advice on strengthening your payment terms or pursuing unpaid invoices, please contact us at info@broadhurstllc.com