In their latest efforts to cut red tape for small business, on Monday the government vowed to lift the restrictions on invoice finance by 2016.
Business secretary Sajid Javid stated earlier this year that the government will save businesses £10bn through their new deregulation measures by the end of the decade.
As the Government works towards this pledge the energy, waste, agriculture, care home and mineral extraction industries are among the key sectors that were promised a red tape “bonfire” by Mr Javid in July:
“I am determined to take the brakes off British businesses and set them free from heavy-handed regulators.
“The Government’s pledge to cut £10bn in red tape over the course of this Parliament will help create more jobs for working people, boost productivity and keep our economy growing.
“We want firms to tell us where red tape is holding them back and help us make Britain the best place in Europe to start and grow a business” said Mr Javid.
In their most recent step, on Monday, the business department said it would ban anti invoice finance terms in contracts, freeing them from restrictive and contractual clauses that prevent them from gaining invoice finance.
The measures are set to come into force early next year, in the hope to open up more funding opportunities that will benefit small businesses.
Their aim with this initiative to create easier access to finance for small businesses and enable them to secure finance against money owed to them in invoices.
Currently invoice financing allows businesses to apply for funding using invoices for money owed to them as a security measure. According to Asset Based Finance Association:
‘More than 44,000 British businesses receive over £19bn of funds using invoice finance at any one time’.
Jeff Longhurst, Chief Executive Officer of the Asset Based Finance Association, said:
“This is good news for UK businesses. As government recognises, invoice finance is a key source of funding for SMEs in particular, and taking effective action against bans on the assignment of invoices will allow more businesses to unlock the funding tied up in their unpaid invoices.”
According to Small business minister Anna Soubry, ‘small businesses are the economic backbone of Britain’ and the government’s new initiative will speed up economic growth and create more jobs.
“By scrapping restrictions on invoice finance, thousands of firms across the country could 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 cash flow. This is all part of our plan to maintain the UK’s position as the best place in Europe to start and grow a business.”
Previously the business department has said that it will tackle the late payments through setting up a small business conciliation service to aid the settling of disputes between small and large businesses.
Monday’s announcement was warmly welcomed by The Federation of Small Businesses (FSB), their national chairman John Allan stating that it will “empower businesses to take more control over their finances”.
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