News Article

Factoring & Invoice Discounting

GLI Finance Supports BIS Consultation on Nullifying the Ban on Invoice Assignment Clauses

By CreditMan Thursday, February 12, 2015

GLI Finance Ltd (GLI), the leading investor in the global alternative finance sector, yesterday submitted a written response to BIS’ consultation on nullifying the ban on invoice assignment clauses - a proposal it staunchly supports.

Ban on invoice assignment clauses are particularly prohibitive for businesses supplying larger corporations and organisations, as many are SMEs already facing a dearth of financing options. By preventing businesses from assigning their trade receivables to finance providers, thousands of UK SMEs are being stymied and presented unnecessarily with another hurdle to overcome.

Given this, GLI is highly supportive of the Government’s aims to open up the market place for funding and to improve access to alternative finance for SMEs, and bigger businesses alike. Indeed, so far the Government has made excellent progress in supporting the alternative finance sector, and GLI hope this momentum will continue to grow as the year progresses.

Invoice finance is especially useful as a means of cash flow management to businesses that provide goods and services under a contract, or businesses that need to raise additional finance but lack fixed assets to provide security to obtain a loan.

GLI supports the nullification of ‘ban on assignment’ clauses, for the following reasons:

  • There is no valid reason for companies incorporating this ban on assignment in their terms and conditions, as invoice financing does not affect the legal rights a company may have against their supplier;

  • The clause will ensure that the original contracting parties remain responsible to perform the contract, eliminating potential concerns about the assignment of trade receivables;

  • The ‘ban of assignment’ clause means that some invoice financiers may be unable to offer any finance or have to reduce available funding; and

  • Proportionately, invoice assignment clauses hit SMEs and start-ups the hardest, when we should be making every effort to support such businesses reach their potential.

Whilst we are strongly supportive of this proposed measure, the implementation of the commercial confidentiality and linked contracts remains a small concern. GLI question whether such protections could be put in place only when required, for example through the addition of a separate confidential ability clause.

Commenting the consultation and GLI’s submission, Louise Beaumont, Head of Public, said: “We are supportive of any measures that seek to improve the treatment of SMEs, so we wholeheartedly support the nullification of ‘ban on assignment’ clauses. Such clauses only serve to narrow the finance options available to businesses that they may require in order to deliver simple business functions, like fulfilling an order. On a micro-level this is entirely counterproductive, but also on a macro-level, as we should be doing everything possible to help SMEs achieve their potential, after all they contribute nearly 50% of our economy and 60% of private sector employment.”

GLI Finance Ltd (GLI) is the leading investor in the global alternative finance sector offering a spectrum of financial solutions to SMEs via its portfolio of platforms. GLI invest in alternative finance providers who enable Small and Medium-sized Enterprises to gain access to eight types of finance (supply chain finance, matchmaking, rewards, donations and invoice finance) across 16 platforms and 3 continents (North America, Europe and Africa).