Export financing for SMEs : the role of factoring

A challenge for many small exporters is access to financing. In particular, many exporters find it difficult to finance their production cycle, since after goods are delivered most buyers demand 30 to 90 days to pay. For this duration, sellers issue an invoice - recorded for the buyer as an account payable and for the seller as an account receivable - which is an illiquid asset for the seller until payment is received. Factoring is a type of supplier financing in which firms sell their credit-worthy accounts receivable at a discount (generally equal to interest plus service fees) and receive immediate cash.