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IDA and KUKE Finance will provide factoring to SMEs

07.10.2019

The Industrial Development Agency (IDA) in collaboration with KUKE Finance is introducing a new product into its portfolio – factoring for small- and medium sized companies, whose operations and development are impeded by liquidity needs and the lack of access to external, secure financing.

The representatives of the IDA and KUKE Finance signed a cooperation agreement on 7th October 2019 during Congress 590 in Rzeszow, under which factoring solutions offered by KUKE Finance, especially non-recourse factoring, will be made available to small and medium-sized companies through IDA’s Entrepreneur Service Centres.

Photo: Polish Press Agency

“After our leasing offer that was received excellently by the market, we have decided to enhance the available solutions with factoring, which is the fastest growing segment of financial services in Poland. KUKE Finance, which just like the IDA belongs to the Polish Development Fund group, was a natural partner to work with. Its offer guarantees that entrepreneurs who apply to the IDA for financing their ongoing operations will receive a complete set of factoring tools at a competitive price. We’re confident that this new product will get strong interest as many of the companies we service have already been asking about factoring. We also expect that non-recourse factoring, which does not weigh down the company’s balance sheet but instantly improves liquidity, will be a better solution for some of the companies benefiting from our loans, for instance,” Paweł Kolczyński, Vice-President at the IDA explained.

Companies whose annual turnover exceeds PLN 4 million, who have been operating for at least 2 years, and have integrated accounts can apply for factoring at the IDA. The service is available to entities regardless of the sector in which they are active. According to the figures provided by the Polish Factors Association (PFA), production companies are responsible for almost half of the turnover of factors, while distribution companies are responsible for 1/3. Transport or construction companies have a smaller share. The IDA will flexibly respond to the needs of clients, offering tailored solutions, but non-recourse factoring is to be product of first choice. It guarantees the security of receivables even in the event of their non-payment by the buyer.

“We are capable of ensuring fast and flexible solutions within non-recourse factoring services to IDA customers. This is an optimum tool for the SME sector, giving the certainty of fast financing and security when it comes to cooperation with buyers. It is worth noting that non-recourse factoring is the fastest growing variant of this service in Poland. It is particularly useful in trading between small operators where the risk of non-payment or long delays is very high, and small enterprises specifically are most at risk of losing their liquidity due to low capitalisation and limited access to external financing. We’re immensely pleased that we have commenced cooperation with the IDA, whose sales network is growing rapidly and has an impressive customer base. This is a new channel for reaching yet another group of entrepreneurs, which should come around to this financing for good, particularly that it also additionally ensures the management of receivables and soft collection, taking the burden of many additional duties and obligations off entrepreneurs,” Konrad Klimek, President at KUKE Finance, asserted.

Factoring is addressed to companies that provide products or services to buyers with deferred payment terms. Many analyses have shown that bottlenecks in payments are still among the key problems in the Polish economy. According to a survey carried out by the National Debt Register (NDR) and the Conference of Financial Enterprises (CFE) in Poland, the lack of timely payment from counterparties is a barrier to doing business for over 57 percent of companies. At the same time, the entrepreneur index of receivables calculated by the NDR and the CFE revealed that Q2 2019 had the highest level of bottleneck intensity for six years. This was mainly down to the higher share of overdue receivables in company portfolios and the average period of waiting for payment being drawn out by almost two weeks. Nine out of ten companies are having problems related to the untimely payment of receivables by their clients.

This shows just how useful factoring can be, whose main advantage lies in releasing frozen funds in unpaid invoices. Additionally, companies have the certainty of receiving funds as soon as they raise an invoice and can count on the optimisation of the receivables portfolio management process, which translates into time savings, counterparty credibility verification by the factor, and an appropriate distribution of the commercial risks. In the case of full factoring, protection against counterparty insolvency and additional verification of counterparties by the insurer is also provided.

According to PFA data, almost 17 thousand firms have contracted a factoring service in Poland. The value of invoices financed by the sector came to PLN 132 billion in the first half of 2019.

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