The government has proposed new laws to make it easier for small businesses to access finance for late payments.
Currently, larger businesses in contracts with small suppliers can prevent the smaller business from securing invoice finance from banks or other investors.
Under the proposed laws, any such restrictions for SMEs in contracts entered into after 31 December 2018 would have no legal effect.
Late payments are a problem for many firms, with a third of payments to SMEs being made late according to the Federation of Small Businesses.
Invoice finance allows businesses to raise money from these unpaid invoices, by assigning their right to be paid to a finance provider in exchange for funds.
The proposed laws would mean restrictions on this type of finance could simply be disregarded and as such easing any potential cashflow crises.
This excludes certain types of contract, such as contracts for financial services, with consumers, or connected with the sale of a business.
Kelly Tolhurst, small business minister, said:
"The UK's 5.7 million small businesses are the backbone of our economy, with more than 1,000 starting up every day.
"These new laws will give small businesses more access to the finance they need to succeed and will help ensure they have a level playing field from which to set fair contracts with the businesses they supply."
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