News Article

Ban on Assignment Clauses to be Outlawed

The government has vowed to lift restrictive clauses in contracts which prohibit small companies from using invoice finance against big business customers.

About 44,000 companies receive more than £19bn of funding this way at any one time, but the size of the market is limited by clauses designed to prevent a supplier from sub-contracting work.

However, a lift on these restrictions is set to benefit businesses and help them grow. The Small Business, Employment and Enterprise Act 2015, which received cross-party support during the passage of the Act through Parliament, allows the Business Secretary to introduce new measures,.

Small Business Minister, Anna Soubry, announced on 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.

She 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”.

"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”.

Jeff Longhurst, Chief Executive of the Asset Based Finance Association, commented: “We welcome the Government’s commitment to addressing poor payment practices and getting a fairer deal for Britain’s small businesses.”

“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.”

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