The government has proposed a change to business legislation that could make it easier for SMEs to use invoice finance to secure funding.

Under the proposal, the existing clauses in supplier contracts that prevent them from using unpaid invoices to access capital would be scrapped. The move has been widely welcomed, in particular following the 2014 Autumn Statement, of which there was some criticism relating to the government’s efforts to improve access to funding for SMEs.

If the proposal becomes law as part of the Small Business, Enterprise and Employment Bill, it should address concerns raised in the wake of the Autumn Statement that measures to stimulate SME funding were too focused on existing schemes whose track records were underwhelming and that alternative finance was shortchanged.

New data from the Asset Based Finance Association show invoice finance use to be at record levels as more and more SMEs use the alternative finance service to generate start-up funding, get on top of payroll and fund growth. Hence, greater access to invoice finance should help drive SME sector growth in 2015.

Looking ahead to next year, the Federation of Small Businesses has released yet more figures that show a significant level of confidence among SMEs, with nearly two thirds expecting growth in 2015. Regulatory reform in favour of invoice finance will help this forecast become reality.

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