Government to ban anti-invoice finance clauses
Small firms will be able to raise funds by borrowing against invoices from large business customers
Small business minister Anna Soubry has announced that small businesses will be “freed” from clauses in contracts which prohibit them from using invoice finance against big business customers.
Set to come into force early next year, the ban on anti-invoice finance is intended to improve small business cash flow and “will speed up economic growth and create more jobs”.
Clauses which block invoice finance arrangements will be nullified, meaning small firms can apply for finance using invoices for money owed to them as security.
According to the Asset Based Finance Association, 44,000 businesses have raised over £19bn funding in invoice funding to date.
The news coincides with a study released today which reported that investors predict the alternative finance industry will grow 23% by 2017.
Soubry commented: “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.”
Anil Stocker, co-founder of MarketInvoice-which specialises in invoice lending for small and medium businesses-said of the news:
“Business owners will know the frustration of completing a piece of work and then waiting months to get paid; so it's important that businesses have the option to use their invoices to access funds straight away.
“The government's move to stop big companies preventing smaller businesses using invoices to access finance is a welcome one, there was no good reason for big businesses to hold this power over their suppliers.”
Read the government consultation on nullifying anti-invoice finance clauses here.