New UK laws to free businesses access to invoice finance

Monday 10 September 2018 11:29 CET | News

UK Government has announced introducing new laws to remove barriers to invoice finance in the construction supply chain.

The laws are meant to arm small businesses against unfair contracts that stop them raising money from unpaid invoices. Presently a small supplier’s contract with a larger company may prevent it from securing invoice finance from providers such as banks and other investors.

Many sales contracts contain provisions stating that assignment is prohibited or subject to certain conditions. Bans on assignment clauses used to prevent a supplier from subcontracting work or preserve confidential dealings between businesses. But, these clauses often have the unintentional consequence of blocking invoice finance arrangements, which allow businesses to apply for finance using invoices for money owed to them as security.

Under the proposed law, any such contractual restrictions entered into after 31th of December 2018, would have no effect and could be disregarded by small businesses and finance providers. This is said to help stop larger businesses from abusing their market position.

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Keywords: UK, government, businesses, invoice finance, supply chain finance, construction supply chain, SMEs, finance, security
Countries: World