New rules to prevent big businesses stopping SME suppliers from using invoice finance
- “A critical step forward for alternative finance” - ABFA
The Asset Based Finance Association (ABFA) has welcomed the announcement by the Department for Business, Innovation and Skills (BIS) that it will outlaw contractual clauses used by big businesses to prevent their SME suppliers from securing funding through invoice finance.
Small Business Minister Anna Soubry announced on Sunday (August 9) that so-called ‘bans on assignment’, which are often imposed on smaller supplier businesses by larger customer businesses, will be nullified from early 2016.
The ABFA says that these clauses are an example of poor payment practice, and an unfair and unnecessary restriction on the ability of small businesses to access crucial funding to support their growth.
Jeff Longhurst, Chief Executive of the ABFA, comments: “We welcome the Government’s commitment to addressing poor payment practices and getting a fairer deal for Britain’s small businesses.
“With the Government’s focus on reducing waits for payment and now outlawing bans on assignment, it’s clear that there is a real move to level the playing field for SMEs.
“As unpaid invoices represent one of the biggest assets most SMEs have, these clauses have the effect of choking off a vital source of funding. For them to be outlawed is good news for small businesses in a difficult economic environment.
“We look forward to seeing the final detailed regulations to ensure that they are effective in allowing SMEs to access the finance they need through their unpaid invoices.”
Members of the ABFA currently provide £9 billion in finance borrowed against the value of SME invoices, and £18.9 billion overall in asset based finance to businesses.
David Thomson, CEO of Close Brothers Invoice Finance, added, "Not only is this good news for businesses around the country but also for our industry as a whole. Asset based finance is increasingly used by company owners and FDs as a sustainable form of business funding and our doors are open to discuss the many options that are available."
