Written by: Keith Tully
Published: 10th September 2018
The government has announced plans to introduce laws that will free up access to invoice finance among small companies across the UK.
Plans are in place to make it impossible, for the most part, for larger client companies to insist that their smaller scale suppliers don’t use invoice-based financing solutions.
According to the government, the effect of the rule changes will be to loosen restrictions on small businesses in ways that serve to level the playing field among enterprises of different sizes nationwide.
Until now, large companies have been able to draw up binding contracts that effectively prevent their smaller scale suppliers from raising money on the basis of 'receivables’ or money they’re owed by clients.
As of December 31st 2018, any contract clauses which stipulate against the use of invoice finance among small businesses will be given no legal credence, with the only exceptions being contracts that involve financial services, consumers or the sale of a business.
Expectations within the government are that the new laws will provide the UK’s small business sector with a significant degree of added financial flexibility that could eventually be worth an extra £1 billion to the economy.
Invoice finance currently being used by SMEs across the country is estimated to be worth a collective total in the region of £9.5 billion.
“The UK’s 5.7 million small businesses are the backbone of our economy and central to our modern Industrial Strategy, with more than 1,000 starting up every day,” commented small business minister Kelly Tolhurst.
“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,” she added.
However, the government has faced criticism from small business representatives in recent days after it was revealed that self-employed people are to continue paying Class II National Insurance, despite promises that the tax would be scrapped as of April 2018.
“The self-employed were promised in no uncertain terms that this niggling tax would end but have been left high and dry,” said Mike Cherry from the Federation of Small Businesses in a statement.
“Our sole traders take risks to provide the flexibility and on-demand expertise that keep our economy growing. It’s about time that contribution was properly recognised.”