Factoring also in the micro version - principles of operation

Service Business

Maintaining financial liquidity is the most important task of every company - from large international corporations to sole proprietorships. That is why virtually all enterprises are looking for solutions that will allow for quick payment of financial liabilities to the tax office, ZUS, or contractors. One of them is factoring, i.e. buying in a bank or another company before the due date of the enterprise's payment. As practice shows, it is an effective method of improving financial liquidity, associated mainly with larger entities. However, there are more and more offers of this type on the market, aimed at micro and small companies.

Microfactoring and factoring

Factoring is a service consisting in the purchase of overdue invoices in exchange for a small percentage of their value. An entrepreneur using factoring receives money from a factoring company, which - when the accounting document becomes due - receives a refund from the client's contractor.

Microfactoring, on the other hand, consists in the sale of invoices by small and medium-sized companies to factoring companies. The microfactoring client receives directly, in a non-cash form, funds for receivables resulting from invoices within a few days from the date they are transferred to the factor.

Microfactoring is financial services addressed to small companies on the Polish market, whose annual turnover is small and amounts to less than PLN 1 million per year

What are the benefits of microfactoring for an entrepreneur?

An entrepreneur selling debts primarily gains an injection of money, which he can freely spend on paying off his arrears and current liabilities. In addition, from the moment the contract is signed, the factor is responsible for monitoring and ensuring timely payment by debtors. For the entrepreneur, this means no need to appoint people responsible for such tasks, or to hire additional staff for this purpose. Moreover, he can easily go about his core business.

Thanks to the factor care, the entrepreneur can increase his competitive advantage by offering sales with an extended payment term (buyers will be disciplined by the factor, therefore the regularity and timeliness of repayment of liabilities will increase).

Microfactoring is devoid of many barriers typical for factoring (e.g. minimum number of recipients, minimum turnover for factoring, there are no industry exclusions).