The Role of Factoring for Financing Small and Medium Enterprises
Around the world, factoring is a growing source of external financing for corporations and small and medium-size enterprises (SMEs). What is unique about factoring is that the credit provided by a lender is explicitly linked to the value of a supplier's accounts receivable and not the supplier&...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/05/5800536/role-factoring-financing-small-medium-enterprises http://hdl.handle.net/10986/8939 |
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okr-10986-89392021-04-23T14:02:42Z The Role of Factoring for Financing Small and Medium Enterprises Klapper, Leora ACCOUNTING ACCOUNTING STANDARDS ACCOUNTS ASSETS BALANCE SHEET BALANCE SHEETS BANK CONTRACTS BANK LENDING BANK LOANS BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING COLLATERALIZATION COLLECTION SERVICES COMMERCIAL BANKS COMMERCIAL CREDIT CONTRACT ENFORCEMENT CREDIT APPROVAL CREDIT RISK DEBT DEFAULT RISK DEPOSITS DEVELOPED COUNTRIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES OF SCALE EMERGING MARKETS EMPLOYMENT EXCHANGE RATE FACE VALUE FACTORING FINANCIAL INSTITUTIONS FINANCIAL SERVICES FINANCIAL SYSTEMS GDP GDP PER CAPITA GROWTH RATE IMMEDIATE LIQUIDITY INCOME INSURANCE INTEREST RATE INTEREST RATES INVENTORY LABOR COSTS LAWS LIABILITY MANAGEMENT INFORMATION SYSTEMS PORTFOLIOS PROFITABILITY REAL GDP REGIONAL BANKS RISK MANAGEMENT RISK SHARING SAVINGS SECURITIES TECHNICAL ASSISTANCE TRANSACTION COSTS WORKING CAPITAL Around the world, factoring is a growing source of external financing for corporations and small and medium-size enterprises (SMEs). What is unique about factoring is that the credit provided by a lender is explicitly linked to the value of a supplier's accounts receivable and not the supplier's overall creditworthiness. Therefore, factoring allows high-risk suppliers to transfer their credit risk to their high-quality buyers. Factoring may be particularly useful in countries with weak judicial enforcement and imperfect records of upholding seniority claims because receivables are sold, rather than collateralized, and factored receivables are not part of the estate of a bankrupt SME. Empirical tests find that factoring is larger in countries with greater economic development and growth and developed credit information bureaus. In addition, the author finds that creditor rights are not related to factoring. The author also discusses reverse factoring, which is a technology that can mitigate the problem of borrowers' informational opacity in business environments with weak information infrastructures if only receivables from high-quality buyers are factored. She illustrates the case of the Nafin reverse factoring program in Mexico and highlights how the use of electronic channels and a supportive legal and regulatory environment can cut costs and provide greater SME services in emerging markets. 2012-06-25T15:50:09Z 2012-06-25T15:50:09Z 2005-05 http://documents.worldbank.org/curated/en/2005/05/5800536/role-factoring-financing-small-medium-enterprises http://hdl.handle.net/10986/8939 English Policy Research Working Paper; No. 3593 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTING ACCOUNTING STANDARDS ACCOUNTS ASSETS BALANCE SHEET BALANCE SHEETS BANK CONTRACTS BANK LENDING BANK LOANS BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING COLLATERALIZATION COLLECTION SERVICES COMMERCIAL BANKS COMMERCIAL CREDIT CONTRACT ENFORCEMENT CREDIT APPROVAL CREDIT RISK DEBT DEFAULT RISK DEPOSITS DEVELOPED COUNTRIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES OF SCALE EMERGING MARKETS EMPLOYMENT EXCHANGE RATE FACE VALUE FACTORING FINANCIAL INSTITUTIONS FINANCIAL SERVICES FINANCIAL SYSTEMS GDP GDP PER CAPITA GROWTH RATE IMMEDIATE LIQUIDITY INCOME INSURANCE INTEREST RATE INTEREST RATES INVENTORY LABOR COSTS LAWS LIABILITY MANAGEMENT INFORMATION SYSTEMS PORTFOLIOS PROFITABILITY REAL GDP REGIONAL BANKS RISK MANAGEMENT RISK SHARING SAVINGS SECURITIES TECHNICAL ASSISTANCE TRANSACTION COSTS WORKING CAPITAL |
| spellingShingle |
ACCOUNTING ACCOUNTING STANDARDS ACCOUNTS ASSETS BALANCE SHEET BALANCE SHEETS BANK CONTRACTS BANK LENDING BANK LOANS BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKRUPTCY BANKRUPTCY LAWS BANKS BORROWING COLLATERALIZATION COLLECTION SERVICES COMMERCIAL BANKS COMMERCIAL CREDIT CONTRACT ENFORCEMENT CREDIT APPROVAL CREDIT RISK DEBT DEFAULT RISK DEPOSITS DEVELOPED COUNTRIES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES OF SCALE EMERGING MARKETS EMPLOYMENT EXCHANGE RATE FACE VALUE FACTORING FINANCIAL INSTITUTIONS FINANCIAL SERVICES FINANCIAL SYSTEMS GDP GDP PER CAPITA GROWTH RATE IMMEDIATE LIQUIDITY INCOME INSURANCE INTEREST RATE INTEREST RATES INVENTORY LABOR COSTS LAWS LIABILITY MANAGEMENT INFORMATION SYSTEMS PORTFOLIOS PROFITABILITY REAL GDP REGIONAL BANKS RISK MANAGEMENT RISK SHARING SAVINGS SECURITIES TECHNICAL ASSISTANCE TRANSACTION COSTS WORKING CAPITAL Klapper, Leora The Role of Factoring for Financing Small and Medium Enterprises |
| relation |
Policy Research Working Paper; No. 3593 |
| description |
Around the world, factoring is a growing source of external financing for corporations and small and medium-size enterprises (SMEs). What is unique about factoring is that the credit provided by a lender is explicitly linked to the value of a supplier's accounts receivable and not the supplier's overall creditworthiness. Therefore, factoring allows high-risk suppliers to transfer their credit risk to their high-quality buyers. Factoring may be particularly useful in countries with weak judicial enforcement and imperfect records of upholding seniority claims because receivables are sold, rather than collateralized, and factored receivables are not part of the estate of a bankrupt SME. Empirical tests find that factoring is larger in countries with greater economic development and growth and developed credit information bureaus. In addition, the author finds that creditor rights are not related to factoring. The author also discusses reverse factoring, which is a technology that can mitigate the problem of borrowers' informational opacity in business environments with weak information infrastructures if only receivables from high-quality buyers are factored. She illustrates the case of the Nafin reverse factoring program in Mexico and highlights how the use of electronic channels and a supportive legal and regulatory environment can cut costs and provide greater SME services in emerging markets. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Klapper, Leora |
| author_facet |
Klapper, Leora |
| author_sort |
Klapper, Leora |
| title |
The Role of Factoring for Financing Small and Medium Enterprises |
| title_short |
The Role of Factoring for Financing Small and Medium Enterprises |
| title_full |
The Role of Factoring for Financing Small and Medium Enterprises |
| title_fullStr |
The Role of Factoring for Financing Small and Medium Enterprises |
| title_full_unstemmed |
The Role of Factoring for Financing Small and Medium Enterprises |
| title_sort |
role of factoring for financing small and medium enterprises |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/05/5800536/role-factoring-financing-small-medium-enterprises http://hdl.handle.net/10986/8939 |
| _version_ |
1764407403162370048 |