Factoring and invoice discounting received a major boost when the Chancellor, Alistair Darling announced he will abolish the ban on assignment of debt within government contracts.
The government has agreed to ditch the requirement of consent in its procurement contracts before suppliers can assign their debt to a receivables finance company.
The move was revealed in the Government’s new strategy paper Enterprise: unlocking the UK’s talent, which was launched to coincide with the Chancellor’s first Budget. It will affect existing and new contracts and means thousands of companies using invoice finance will now be able to compete on a level playing field for government tenders.
Kate Sharp, chief executive of the Asset Based Finance Association, which lobbied for the change said: “The ban on assignment of debts has prohibited a company which wishes to tender for a public contract from using an intermediary such as a factor or invoice discounter to raise finance without prior permission. As a result, this has prevented many SMEs, which are more likely to use such services in order to improve cash flow, from tendering for pubic contracts.
“We are pleased that the Government has taken on board our comments and recognised that factoring and invoice discounting is an important source of finance to a large number of UK companies.”
David Roberston, chief executive Bibby Financial Services described the move as the “most exciting” development in the budget and that it would help more business gain the finance to help them win government and public sector contracts.
ABFA has been lobbying hard on this issue, first in Scotland and latterly in Westminster.