The UK’s largest businesses could soon be supporting small and medium sized enterprises through a new Supply Chain Finance scheme.
Prime Minister David Cameron is discussing the scheme with large UK businesses today, and hopes that, with their support, tens of thousands of SMEs will secure increased levels of affordable credit resulting in improved cash-flow.
Through the scheme a bank is notified by a large company that an invoice has been approved for payment; the bank is then able to offer a 100 per cent immediate advance to the supplier at lower interest rates because they know that the invoice will be paid by the larger company.
It is thought that the scheme could deliver as much as £20 billion of new, cheaper finance to small and medium sized suppliers across the UK. The Government also intends to offer the scheme where possible, starting with a Supply Chain Finance scheme for community pharmacies.
Commenting, Prime Minister David Cameron said: “This Government is determined to back all those businesses who aspire to get ahead and take on more people. In the current climate, viable businesses can struggle to get the finance they need to grow – this scheme will not only help them secure finance and support cash flow, but will help secure supply chains for some of our biggest companies and protect thousands of jobs. It can be a win-win, with large companies and small suppliers both benefiting from this innovative scheme.”
The news comes after the Forum of Private Business named and shamed Sainsbury’s for increasing its payment terms for all non-food suppliers by 150 per cent from 30 to 75 days.
The Federation of Small Businesses (FSB) has welcomed the new scheme, believing that it will allow larger businesses to play their part in improving confidence and growth. John Walker, national chairman at the FSB said:
“The FSB welcomes the Government’s commitment to helping small firms secure finance. We encourage large companies to support and implement the scheme, so that it can play its part in improving confidence and encouraging growth throughout the supply chain.”
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