The Receivable You Cannot Sell: Anti-Assignment Clauses and the Finance You Never Drew Down

For a supplier waiting sixty days for payment, invoice finance is often less a luxury than a survival tool. Yet the facility that looks straightforward on a broker's illustration can turn out to be undrawable in practice — not because of the funder's credit appetite, but because of a paragraph in the customer's own terms that the supplier signed eighteen months earlier without reading. Anti-assignment wording is one of the quietest causes of a stalled facility in the UK market, and it rarely announces itself.

What the clause does, and what it does not do

An assignment is the transfer of a right to payment from one party to another. In England and Wales, a legal assignment under section 136 of the Law of Property Act 1925 requires written notice to the debtor; an equitable assignment need not be notified, but leaves the funder exposed to the debtor discharging its debt by paying the supplier directly. Most invoice finance arrangements therefore depend on the funder being able to take an assignment — legal or equitable — and, crucially, on serving notice on the customer so that payment is redirected.

An anti-assignment clause does not usually make the assignment impossible. What it does is make it a breach of contract. That distinction matters, because the commercial consequences sit with the supplier rather than the funder: the customer acquires a right to terminate, to withhold payment, or to argue that it has discharged its obligation by paying the supplier, and the funder discovers the problem at the point of collection rather than at the point of onboarding.

Four formulations to look for

The wording tends to fall into a small number of shapes, each with a different negotiating route.

A flat prohibition — "the Supplier shall not assign, charge or otherwise deal with any of its rights under this Agreement" — is the most restrictive and, in practice, the least negotiable.

A consent clause — "no assignment without the Customer's prior written consent" — is often absolute, and an absolute discretion is difficult to challenge. Where consent must not be "unreasonably withheld or delayed", the supplier has more room, but proving unreasonableness is expensive and slow, and a funder will not usually wait for the argument to resolve.

A deemed-consent clause, under which consent is treated as given if the customer does not object within a stated period, is the most workable of the three, provided the notice mechanics are clear and the period is short enough to fit a facility drawdown.

The fourth shape is the absence of any wording at all, combined with boilerplate stating that the agreement may not be varied except in writing signed by both parties. Suppliers frequently assume that if nobody objects, assignment is fine. That assumption is not a contractual right, and a customer faced with a notice of assignment can simply decline to acknowledge it.

Where the wording hides

Anti-assignment language is rarely in the payment terms. It sits in schedules, in framework agreements appended to purchase orders, in supplier portals accepted by a click on a registration screen, in credit application forms signed by a finance director years before anyone contemplated invoice finance, and in collateral warranties on construction projects. It also appears inside confidentiality clauses drafted for an entirely different purpose, and in change-of-control provisions that capture assignment by way of security without ever using the word.

A practical audit therefore begins with the documents themselves, not with a search for the word "assign". The relevant question is whether the customer has agreed, in any binding document, that the supplier's right to payment may be transferred or charged — and if so, on what conditions.

The 2018 Regulations and their limits

The Business Contract Terms (Assignment of Receivables) Regulations 2018, which apply to contracts entered into on or after 31 December 2018, render ineffective certain terms that prohibit or require consent to the assignment of receivables, where the supplier is a small or micro business and the contract is not in an excluded category. The relief is genuine, but it is narrower than many suppliers assume. Contracts signed before that date are untouched, so legacy agreements continue to bite. The size thresholds exclude a good number of suppliers who would not describe themselves as large. Certain categories of contract fall outside the regulations altogether. And the protection addresses the contractual prohibition, not the practical reluctance of a customer's accounts payable team to pay an unfamiliar bank account.

Putting a price on a refusal

Where a significant customer refuses to permit assignment, the cost is calculable. A supplier turning over £2.4 million with a 55-day payment cycle carries roughly £360,000 of receivables at any one time. If the largest customer accounts for a third of that and the funder excludes the debt, the supplier is carrying an unfunded £120,000 — around £12,000 a year at a 10 per cent cost of capital, before any allowance for the growth the facility was meant to fund. Add the early settlement discount a supplier might offer to compensate, and the clause can cost more than the legal fees of negotiating it away.

Negotiating the carve-out

The realistic objective is not unrestricted freedom but a defined permission. A workable clause reads along these lines: "The Supplier may assign, charge or otherwise deal with its receivables and rights to payment under this Agreement, including by way of security to a bank or invoice financier, without the Customer's consent, provided that written notice is given to the Customer. No such assignment shall constitute a breach of this Agreement or entitle the Customer to terminate, suspend performance or exercise any right of set-off, and the Customer shall pay the relevant assignee against a valid notice of assignment."

Two supporting provisions improve the drafting. First, a confidentiality carve-out permitting disclosure to funders, auditors and insurers on customary terms. Second, a short deemed-consent period where the customer insists on retaining an approval right, with a named address for notices and a fixed response window.

Scottish suppliers should note that the equivalent mechanism is assignation, and that intimation to the debtor performs a similar function to notice; the drafting needs to match the jurisdiction rather than being lifted from an English precedent.

When the customer will not move

Some large purchasers will not amend boilerplate for any supplier, and the supplier must then decide how to price the constraint. The options are unglamorous but real: treat the customer as an excluded debtor when structuring the facility; ask the funder for a reserve rather than accept a refusal; shorten terms or introduce stage payments to reduce the exposure; build the cost of capital into the quotation; or, where the relationship justifies it, escalate through the customer's own prompt payment commitments and payment practices reporting.

The broader point is that a contract term which prevents a supplier from monetising its own ledger is a payment term in all but name. It deserves the same scrutiny as the payment days, and it belongs on the checklist before signature — not in the post-mortem afterwards.