Invoice Financing For SMEs

Invioce FinanceMany SMEs have been held back by Britain’s late payment culture for far too long and, as a result, the Government’s plans to relax invoice financing rules early next year are highly anticipated.

From early 2016, The Department for Business, Innovation and Skills (BIS) is banning contractual “non-assignment” clauses used by bigger businesses which effectively prevent SME suppliers from accessing funds through invoice finance.

Currently 44,000 businesses have access to invoice financing. This means that they are able to fund working capital and gain access to the cash they need straightaway instead of waiting to receive payment for an invoice, which can often be beyond agreed credit terms.

Unpaid invoices are often the biggest asset an SME has and invoice financing is an important means of funding working capital. Any restriction on access to funding, intentional or not, hampers growth and when combined with a late payment culture still prevalent in many large businesses, the effects can be devastating for an SME.

Although invoice financing isn’t right for every business, SMEs have found it incredibly difficult to establish reasonable terms with larger companies. The Government plans to introduce a new Late Payments Commissioner to deal with supply chain bullying as well as a conciliation service designed to assist small businesses in settling late payment issues and disputes.

Larger businesses should start to ensure that they’re compliant with the new rules and take this opportunity to be more transparent and open about their payment terms. SMEs will soon have new options to help them grow and plan ahead with greater confidence by knowing they will have the cash in place to move their businesses forward.

For more information on how your business can raise alternative finance, please contact Jim Akrill at jim.akrill@pmm.co.uk or call 01254 679131.