Factoring for SMEs: Unlock Immediate Funding Without Debt in the Peruvian Market

For small and medium-sized enterprises (SMEs) in Peru, accessing financing can be one of their greatest challenges. The demands of the traditional banking system—such as collateral, credit history, or lengthy paperwork—often hinder access to the capital needed to operate and grow. In this context, factoring emerges as an efficient and accessible solution that allows SMEs to obtain immediate liquidity without resorting to loans or debt. In this article, we explore what factoring is, how it works in the Peruvian market, and why it is a key alternative for SME development.

The Financing Challenge for SMEs in Peru

SMEs represent over 95% of the business fabric in Peru and generate a significant portion of the country’s employment. However, many face difficulties financing daily operations, especially when relying on credit sales with long payment terms. Limited access to traditional bank credit, the need for physical collateral, or insufficient credit history are just some of the factors hindering their growth.

What is Factoring and How Does It Help SMEs?

Factoring is a financial tool that allows companies to convert their accounts receivable (unpaid invoices) into immediate liquidity. Through this service, an SME can assign its invoices to a factoring company and receive a percentage of the total value in advance, without waiting for the payment term agreed upon with the client.

Unlike a loan, factoring does not generate debt, as it is based on the assignment of an asset (the invoice) and requires no collateral. This makes it an agile and accessible option for many SMEs that need liquidity to maintain operations.

How Does Factoring Work for a Peruvian SME?

The factoring process is simple and fast. Here is a summary of the steps:

1. The SME issues an invoice to its client for a good or service.
2. The invoice is registered as negotiable (e.g., electronically through SUNAT).
3. The factoring company analyzes the invoice and the final client.
4. Upon approval, the SME receives an advance of between 80% and 90% of the invoice value.
5. When the client pays the invoice, the factoring company delivers the remaining balance to the SME, minus service commissions and expenses.

Practical Example: An SME sells products to a retailer for S/ 20,000 with a 45-day payment term. To avoid waiting, the SME turns to a factoring company that advances 90% (S/ 18,000). At maturity, the retailer pays the factoring company, which then transfers the remaining S/ 2,000 to the SME, minus a small commission.

Benefits of Factoring for SMEs in Peru

• Fast access to liquidity: SMEs don’t have to wait 30, 60, or 90 days to collect, allowing for more stable operations.
• No collateral required: Unlike traditional loans, factoring does not require assets as backing. The invoice is the only necessary guarantee.
• Improved cash flow: Immediate liquidity allows for covering operating expenses, investing in inventory, or taking on new projects.
• No debt generation: Since it is not a loan, factoring does not appear as debt on financial balance sheets.
• Included collection management: Many factoring companies handle the collection process, saving the SME time and resources.

SME Sectors That Benefit Most from Factoring

Factoring is especially useful for SMEs selling to large corporations or institutions with long payment terms, including:

• Trade: Suppliers for supermarkets, department stores, and wholesalers.
• Services: Companies providing services to corporations or government entities.
• Manufacturing: Producers selling to distributors or large chains.
• Export: SMEs exporting products and awaiting international payments.

What to Consider When Choosing a Factoring Company?

• Reputation and market experience.
• Transparency in commissions and service terms.
• Agility in evaluation and disbursement.
• A user-friendly and secure digital platform.
• Personalized attention to understand the specific needs of each SME.

PAN AMERICAN: Factoring Built for Peruvian SMEs

At PAN AMERICAN Financial Services, we understand the real needs of Peruvian SMEs. Our factoring service is designed to offer immediate liquidity, fast processes, and close advisory. We support every client with personalized solutions that adapt to their growth pace and client profile.

Factoring is much more than a short-term solution: it is a strategic tool that allows SMEs to grow, maintain stable operations, and avoid the risks of debt.