New laws to arm small businesses against unfair contracts that stop them raising money from unpaid invoices will be put to Parliament today.
Presently a small supplier’s contract with a larger firm 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 have often 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 31 December 2018, would have no effect and could be disregarded by small businesses and finance providers. This 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.”