The Impact of Ban on Assignment when using Factoring or Invoice Discounting
Typically large businesses that are sensitive about their supply chain will implement a ban on assignment within their contracts. This means that suppliers cannot assign part of their contract to another business. This is typically so the the likes of the MoD or pharmaceutical companies ensure that after checking the manufacturing standards of a supplier or their supply chain that this is not then changed or passed out to a business they would not want to deal with.
The implication is that they can also not assign their invoices in a traditional manner to an invoice factoring provider.
We see this a lot with suppliers to the MoD, pharmaceutical suppliers and the construction industry.
Given it is a common occurence there are solutions available to businesses who are struggling to obtain funding due to their customers ‘terms and conditions’.
In some instances the customer will waive the ‘Ban on Assignment’ as their main motivation is typically not to prevent access to funding for the supplying business. Some lenders will also take a view on the ban on assignment where as others will simply not consider funding where such a clause is in place. Other lenders will agree to fund that debt on a confidential basis so that the customer business is not aware that the debt has in fact been assigned.
If you are struggling to access invoice discounting or factoring due to a ‘Ban on Assignment’ then please get in touch with the team at Funding Solutions today on 0845 251 4040