New laws aim to help small businesses to secure funding

11 Sep 2018

Small businesses struggling to access invoice finance could be helped by the introduction of proposed new laws. The plans form part of the government’s ‘modern Industrial Strategy’.

Invoice financing is an advance against a future payment, under which businesses can approach a finance provider and assign them their right to be paid in exchange for around an initial 80% of the value of the invoices. This initial advance is received within a few days while the balancing 20% (less fees and charges) is paid when the customer settles the invoice.

Currently, small suppliers which are in a contract with a larger company may not be able to secure invoice finance, due to the terms of the contract. Small suppliers often find themselves in a situation where they do not have sufficient power to renegotiate their terms and conditions.

Under the plans, after 31 December 2018 such restrictions will have no effect (with certain exceptions), and small businesses will be able to go to their lending partner to secure the finance they need.

Commenting on the news, Small Business Minister Kelly Tolhurst said: ‘These new laws will give small businesses more access to the finance they need to succeed and will help ensure they have a level playing field from which to set fair contracts with the businesses they supply.’