Factoring, an opportunity for enterprises to manage liquidity and accelerate growth


In the business world, liquidity management is a fundamental aspect for a company to succeed. The factoring, a form of financing companies more and more spread, offers the opportunity to manage liquidity in an efficient way and to make growth faster. In this article, the factoring concept will be explained, as well as the opportunities it represents for enterprises.

For starters, what is factoring?

Factoring is a form of financing companies where a company sells its commercial credits, as invoices or pending payments, to a financial intermediary known as factor. In exchange for credit transfer, the company immediately receives part of the nominal value of the same, generally around 80%-90%. The factor owns the risk to collect credits from debtors and once obtained, transfers the remainder to the company deducting a commission.

Which are the real advantages?

  1. Liquidity improvement: factoring allows companies to obtain an immediate flux via the commercial credits in advance. This can be especially useful for companies who need immediate liquidity for investments, providers’ payments and other operative needs.
  2. Reduction of risk of insolvency: transferring the risk to collect credits to factor, companies can protect by negative consequences of insolvent debtors. The factor leads to an evaluation activity of debtors’ credit, reducing the risk of missed payments and delays.
  3. Financial flexibility: the factoring can be adapted to the company’s specific needs. The companies can choose to let all credits or part of them. Moreover, the factoring can be used as a continuous service or on an occasional basis, based on the financial needs of the company.
  4. Supporting growth: having immediate liquidity available, companies can take advantage of growth opportunities, such as business expansion, new clients acquisition or new product development. The factoring can provide the financial resources to build such goals without having to wait for debtors to pay.

The factoring represents an interesting opportunity for companies, to manage liquidity in an efficient way and to fasten growth, this is confirmed by data published by Assifact (italian association for factoring) as in April 2023 a growth of 3,41% has been registered on the previous year with a cumulative turnover of 86,58 billion euros. Also the emitted stock grew by 2,64% against April 2022 reaching almost 46 billion euros.

In conclusion, factoring can be a powerful instrument to improve financial management and allows us to take advantage of the growth opportunities within the competitive business world.

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