Hundreds of UK small businesses use invoice finance every month to improve their cash flow position, usually for purposes of growth. Over the past few years contracts between these small businesses and their larger counterparts have seen a clause which prevents the use of invoice finance. As of 2016, the Government are set to put a halt to these clauses, providing small businesses with more access to invoice finance.
What caused the contracts to be restrictive?
The Government have been focusing on ways to improve the availability of cash for small businesses. Invoice finance is seen as a suitable solution to bridge the cash flow gap caused by long payment terms, allowing small businesses immediate access to the cash they have earned.
However, some contract clauses between the suppliers and larger firms prevented small businesses from using invoice finance. Usually this is an intentional result of a clause which aims to stop the suppliers from sub-contracting out work.
Invoice finance provides small and medium sized businesses access to cash earlier than they previously would have, improving their ability reinvest in further business opportunities. Invoice finance is usually used to pay wages, materials and other day to day running costs.
As an example, a supplier of a supermarket may have to wait 90 days before they receive payment for supplying their goods. With an invoice finance facility, a lender steps in, looks at the invoice and within 24 hours will provide the majority of the cash value of the invoice to the supplier.
More Access, More Funding, More Growth
When the new Government rules come into play in 2016, small businesses will have access to invoice finance, if they need it. This will provide them with more funding to increase their ability to grow.
If you are interested in invoice finance and would like to learn more, speak to one of our experts today for free, no obligation suggestions on the most appropriate lender for your business.