SMEs are the backbone of India’s economy but often face working capital shortages due to slow receivables realisation. Factoring offers a lifeline by providing immediate cash against invoices, helping SMEs manage liquidity without incurring additional debt.
Unlike bank loans, factoring depends on the creditworthiness of the SME’s customers, making it easier for smaller businesses to access finance. As SMEs grow, factoring facilities scale with their sales, offering a flexible and sustainable funding source.
2025 has seen a surge in digital platforms and fintech innovations that simplify factoring processes, increasing adoption among SMEs. Government policies aimed at financial inclusion and formalisation are further boosting awareness and utilisation of factoring services.
Emerging trends include:
- Technology-driven invoice verification and faster disbursal
- Collaboration between banks, NBFCs, and fintech firms to offer hybrid factoring solutions
- Regulatory enhancements to protect sellers and factors, increasing market confidence
- Educational initiatives to demystify factoring and highlight its benefits
For SMEs, factoring is not just a financing tool but a strategic enabler for growth and stability in a competitive marketplace.
