BusinessBusiness RecoveryBanks close doors on Enterprise bill

Banks close doors on Enterprise bill

Under the terms of the Enterprise Bill, banks will be unable to appoint receivers in the event of default. This, together with the uncertainty of the position regarding the validity of the banks' fixed charges over book debts, could see banks close their doors on traditional financing methods.

Around 54% of owner managers are looking to fund business growth with a bank overdraft or loan. But entrepreneurs relying on this form of finance may have to change their thinking.

Businesses seeking finance will need to be more creative about their options.

Entrepreneurs are increasingly turning to factors and discounters to help cash flow. Providing higher levels of working capital than traditional overdraft facilities, factors and discounters are used by some 30,000 firms, and currently provide funding in excess of £7bn.

A factor purchases accounts receivable for immediate cash and may either: maintain the sales ledger, perform other administrative tasks relating to the accounts receiveable; collect amounts receiveable; provide bad debt protection by absorbing losses arising as a result of a debtor’s insolvency, or disclose this arrangement to the debtors.

Invoice discounting enables a client to contain the cash flow benefits of factoring whilst still retaining control over all sales ledger and credit control.

In asset based lending, the lenders seek to provide working capital against both fixed and current assets. This would include property, plant and/or stock. With funds available, we expect to see asset based lending flourish within a matter of years, providing a boost to the UK’s growing businesses.

  • Tony Supperstone is the national head of business recovery services

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