The Department of Business, Innovation and Skills (BIS) is aiming to alleviate the financial burden of late-paying clients after lifting restrictions on finance obtained against invoices, which will help contractors to maintain a steady cash flow while they are waiting for debtors to pay up.
BIS has made the decision six months after the ‘Invoice finance: nullifying the ban on invoice assignment contract clauses’ consultation concluded in February.
Contractors will now be able to apply for financial assistance using unpaid invoices as added security. BIS says the move does not excuse late payments but it is an important step for the country, as it will make invoice finance more appealing for the self-employed and prospective entrepreneurs.
The minister for small businesses, Anna Sowerby, 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.”
Recent figures published by the Asset Based Finance Association show that an estimated 44,000 business take out loans with a total value of £19bn using invoices that have yet to be paid; however, more than one-third were refused assistance during the second quarter of 2015.
Asset Based Finance Association chief executive Jeff Longhurst claims the new rules are a clear indication that the government is committed to “getting a fairer deal for smaller businesses”.