In its latest effort to cut red tape for small businesses, the government has vowed to lift restrictions on invoice finance.
In a statement today, the business department said it will ban anti-invoice finance terms in contracts as soon as next year, helping more small businesses secure finance against money owed to them in invoices.
Business secretary Sajid Javid said earlier this year that the government will save firms £10bn by the end of the decade through new deregulation measures.
Invoice financing lets businesses apply for funding using invoices for money owed to them as security. More than 44,000 British businesses receive over £19bn of funds using invoice finance at any one time, according to the Asset Based Finance Association.
Small business minister Anna Soubry said the government’s initiative will allow “thousands of firms” to “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,” Soubry added.
The business department has already said it will tackle late payments by setting up a new small business conciliation service to settle disputes between small and large firms.
The Federation of Small Businesses (FSB) welcomed today’s announcement, with national chairman John Allan saying it will “empower businesses to take more control over their finances”.
A recent FSB survey found 38 per cent of its members who applied for finance were refused in the second quarter.