Supply Chain Finance scheme may stave off company liquidation for some

Published on October 26, 2012 by Crawfords Accounting

If you’re facing company liquidation due to slow-paying clients, the Supply Chain Finance scheme could be one way to unlock some of the funds you are owed.

Announced earlier this week by prime minister David Cameron, it is effectively a means by which you can borrow against 100% of the value of your unpaid invoices.

Other forms of invoice finance already exist, but are usually capped at around 70% of the invoice value.

Under the SCF scheme, customers can issue a promissory note for the full amount, which can then be taken to a bank as proof that payment will be forthcoming.

The bank may then decide to lend up to 100% of the amount owed by your client, at a lower interest rate than most other short-term loans.

You can use this money to prevent company liquidation, to cover expansion or stock replenishment costs, or simply to improve your day-to-day cashflow.

However, the scheme has come under some criticism as it involves paying interest on money you are owed – as opposed to charging your clients statutory interest for their late payments.

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