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Changes to invoice legislation spells good news for the UK’s SMEs


Running a small or medium-sized business in the UK can be a tough proposition. Only last week a survey commissioned by Tungsten revealed that a quarter of SMEs have been put under severe financial strain by the late payment of invoices. Worryingly, the average figure owed to these firms is over £40,000, with £21,000 overdue.

Add to this the daily challenges of staffing, cost management and ever-changing legislation and you’d be forgiven for thinking that running an SME is an exercise in managing bad news.

However, there was some welcome good news for SMEs this week. Small Business Minister Anna Soubry announced that the government would be stepping in to stop large firms adding restrictive clauses that prevent suppliers from accessing invoice finance.

Invoice finance, which allows businesses to convert their receivables to cash at their choosing, is a welcome alternative to traditional lending products at a time when securing funding remains a challenge.

Recent figures from the Federation of Small Businesses show that in the second quarter of this year, 38% of companies who applied for finance were refused. This is a troubling figure, not least for the businesses themselves, but also for the wider economy. A company strangled of finance cannot trade, expand or employ. In short, everyone loses.

It’s no surprise therefore that the use of invoice finance is growing within the business community. According to the Asset Based Finance Association, over 44,000 businesses are receiving upwards of £19 billion at any one time using this method. There is also significant growth in other areas of alternative finance, including P2P business lending, where businesses lend to each other, and equity crowd funding in which a business raises investment money online in return for shares in the company.

Here at Tungsten we’ve seen an increase in demand for our Early Payment service, suggesting that SMEs are growing increasingly confident in these emerging, flexible sources of finance. We welcome any changes in legislation that enable this process to be more straightforward.

Anna Soubry is right when she says that SMEs are “the economic backbone of Britain” and it’s pleasing when political soundbites are seconded with actions that will make a substantive difference to businesses owners.

It’s good to know that the government is listening.


About the author

Henning Holter

Henning Holter is Head of Business Development at Tungsten Network Finance. Henning has led the development of a number of private-equity funded technology start-ups, and held senior sales and business development roles in international listed companies. Henning received his B.Sc. in Industrial Engineering and Operations Research from the University of California at Berkeley, and his MBA from INSEAD. He has also served as a commissioned officer in the Royal Norwegian Navy.



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