Tuesday 23rd October, 2012

The Prime Minister has today thrown his weight behind a supply chain initiative, gathering more than 40 of the UK's biggest businesses in Downing Street to persuade them to help their smaller suppliers in the form of cost effective, efficient and fast-track invoice financing. The plan being to enable their smaller suppliers to raise cheap short-term loans from banks against the security of approved invoices.

The idea, say officials, is that supply-chain finance of this sort could accelerate small businesses access to £20bn of cash - with the aim of reducing these businesses reliance on more expensive bank funding.

Prime Minister, David Cameron is trying to set an example by implementing the scheme in relation to what the state buys from small pharmacies - which apparently could free £800m for them.

Cameron says; "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."

Andrew Jesse, UK VP, Basware comments; "Businesses have found numerous ways to operate in the atmosphere of caution that pervades global business and supply chain financing is a key method for businesses to grease the cogs of cash flow when payment terms and credit remain tight. With some payment terms standing at 120 days before payment according to BACS, securing credit against invoices can be the only way for small businesses to survive when the order books are full but the bank account is empty.

With high profile businesses such as Sainsbury's announcing an extension of payment terms, the hope is that this new initiative will flag up the pressures on the supply chain and go some way to relieving them.