Government plans to give small firms legal right to use invoice finance
Government plans to give small firms a legal right to use invoice finance have been welcomed by Ashley Business Finance.
Small Business Minister Anna Soubry has announced that restrictions in contracts which prevent firms using invoices to raise finance will be outlawed from early next year. It is part of the government’s measures to tackle the problem of late payment.
Jonathan Cranston, chairman of Ashley Business Finance, said: “Restrictions in contracts are commonplace. Over the years we’ve had to turned down many small businesses which have applied to us for funding because their customer has put a clause in the contract preventing them from using their invoices to raise finance.
“Often big companies don’t like dealing with invoice finance providers as they know we have professional credit control teams in place to chase up unpaid bills. However these restrictions are grossly unfair.
“With small firms facing difficulty in raising finance, invoice finance is often the most realistic option. Effectively they are being denied access to finance. At the same time some of these big companies are forcing them to accept payment terms as long as 90 to 120 days which they are expected to fund from their own cashflow.”
It is estimated that the country’s five million smaller firms are owed £26.8 billion in overdue payments.