Economic Role of Factoring in Financing Small Business.

An survey found that bank owned and independent factoring firms revealed that factoring companies combines credit insurance, book keeping of the client, and the supply of finance(which is the main function). 

Different services are offered to the particular requirements of each client, but clients are not obliged to take all the services. Factoring companies usually work with multiple firms within a specified industry which will help this in gaining the knowledge/ experience from dealing with different clients and the customers make themselves ready to accept the offer services that go beyond the simple purchasing of accounts receivable.

A market, an industry, customers, sales, costs and credit are important parameters potentially to enhance the economic efficiency and performance of the small enterprise. As factoring is considered to be a financing option that supports the working capital of firms, then it is possible to establish a positive relationship between turnover and working capital requirements incorporating the economic role of factoring and invoice financing.

There is few argument saying that factoring service is more suitable for new businesses for growing in the terms of their turnover where the main need is working capital support.

Nowadays factoring is more widely accepted technique for financing the working capital of small

Enterprises. Therefore, the growth in the potential role that the factoring industry can play in

Cementing its contribution in the financial services market to small businesses becomes increasingly important.

The combination of a rapidly growing factoring industry with increasingly risk-assessment information will encourage greater competition, increasing market segmentation and possibly higher levels of supplier concentration, which will all be conducive to making a positive contribution to the economic decision-making process of financing Micro, Small and Medium Enterprises(MSME).