Invoice financing changes to help SMEs funding opportunities

BUSINESSES will be freed from restrictive clauses in contracts that prevent them from gaining invoice finance when new measures come into force early next year.

It is hoped that the move will open up more funding opportunities, and specifically benefit SMEs.

Invoice finance allows businesses to apply for finance using invoices for money owed to them as security.  This means that, in some instances, they can get money faster than if they waited for their customers to pay them. 

More than 44,000 businesses receive over £19bn of funding this way at any one time, according to the Asset Based Finance Association, which represents the invoice finance industry in the UK. 

But the size of the market is limited by clauses designed to prevent a supplier from sub-contracting work. 

The clauses have the unintentional consequence of blocking invoice finance arrangements and will be nullified, while retaining a customer’s right to prevent traditional sub-contracting arrangements.

Small Business Minister Anna Soubry said: “Small businesses are the economic backbone of Britain and we will do everything possible to make sure they continue to grow and create jobs.

“By scrapping restrictions on invoice finance, thousands of firms across the country could benefit from faster access to hard-fought funds. 

“While invoice finance may not be right for everyone and is absolutely no excuse for late payment, I want small businesses to have the option of using it to increase their cashflow. This is all part of our plan to maintain the UK’s position as the best place in Europe to start and grow a business.”