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Government sets new laws to assist small firms with finance

Monday 10th September, 2018

Department for Business, Energy & Industrial Strategy has announced new laws that aims to make it easier for small businesses to access invoice finance, providing a £1bn long-term boost to the economy.

The new laws form part of the government’s modern Industrial Strategy, building an environment in which small businesses can thrive.

Small Business Minister Kelly Tolhurst will today put forward new laws to arm small businesses against unfair contracts that stop them raising money from unpaid invoices.

Currently a small supplier’s contract with a larger company may prevent it from securing invoice finance from providers such as banks and other investors.

Under the new proposed laws, any such contractual restrictions entered into after 31 December 2018, with certain exceptions, would have no effect and could be disregarded by small businesses and finance providers, which will help stop larger businesses from abusing their market position.

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.”

The proposed laws come as a number of larger businesses stop their suppliers from assigning ‘receivables’ – the right to receive the proceeds from an invoice. This assignment is essential for invoice finance to operate.

Restrictive contract terms are often used by larger businesses to maintain a hold over their suppliers, with small suppliers often unable to negotiate changes to the proposed contract because they do not have enough power in the marketplace.