Should a customer refuse to accept an assignment then the invoice finance
company cannot finance that customer. Many large companies resented paying a third party and also did not like having to deal with a more professional collection department chasing unpaid invoices.
Small Business Minister Anna Soubry has announced that legislation will be brought in next year to outlaw restrictions on the assignment of invoices. This is good news for both factoring companies and their clients as it should mean that ledgers subject to creditworthy will be fully funded.
It may of course lead to companies making enquiries on their suppliers in order to establish if the factor their invoices. They of course could decide not to deal with such companies if they are uncomfortable with dealing with third party finance companies.
I suspect that most businesses won’t make such enquiries regarding the finance arrangements of their suppliers. They will of course have to be much more disciplined when there are disputes with products and services as factoring companies will require proper evidence supporting any disputes. In other words don’t raise the dispute when they are chasing for payment.