The European Union has given the green light to a scheme in which councils speed up their invoice payments by working with a private sector partner.
Under the model, the financial service firm Oxygen provides the software needed for councils to make quick payments to businesses.
In return for the fast payment, businesses give the council a discount.
The Official Journal of the European Union has approved this model, which was used by Northumberland CC, meaning it can be replicated in other areas.
An Oxygen spokesman said it was the first time this model had been approved by the EU. He said it would bring an end to the delays councils face when tendering for partners to speed up their payment systems.
The firm’s European chief executive Roberto Moretti said: “Late payment is a curse for small businesses and chokes local and national economies.
“What this contract means is that the public sector can lead the fight back and at the same time start a gold rush towards millions in extra funding that can be invested into frontline services.”