Bans on assignment, contractually imposed by powerful purchasers, have long reduced the availability of invoice finance to SMEs when acting as suppliers of goods and services. With such bans in place the resulting invoiced debts cannot be used as collateral for funding under factoring or invoice discounting agreements, unless costly and time consuming waivers from such debtors are obtained or work arounds, such as trust accounts, are set up. Waivers are rarely forthcoming. Without such arrangements a disclosed financier cannot collect debts directly from the debtor.
The Government has now introduced proposed legislation to wipe out the widespread use of bans on assignment. The Small Business, Enterprise and Employment Bill 2015 is currently before Parliament. When passed, it will enable the Department of Business Innovation and Skills (BIS) to pass regulations as to how such bans are to be made ineffective and how widespread such nullification will be.