India's ever-increasing openness to trade is amplifying opportunities for the factoring services.

In today's competitive markets it is no longer a cakewalk for any corporate to hold and sustain its business as it is often exposed to a gamut of risks. It's all the more difficult for a young and upcoming enterprise that needs enough financial muscles to confront contingencies. A steady stream of liquid cash is the lifeblood for any business house for which they usually depend on banks and financial institutions. However for Small and Medium Enterprises (SMEs) raising credit from institutional sources is a difficult task as these institutions insist on collateral securities. To counter this factoring is catching on amongst India's SMEs. Factoring mainly assists companies with quick payment for their services in the form of financing working capital management of the sellers' sales ledger collection of debts purchased and credit risk protection. Apart from these four basic services factoring players also provide assured advisory services to the clients by leveraging their experience in credit and financial dealings and access to widespread credit information.

India's ever-increasing openness to trade is amplifying opportunities for the factoring services and conversely enabling an increase in international trade. Significantly factoring offers enormous benefits for the SMEs. The SME sector contributes 50% of the exports and is the second largest employment generator next to agriculture. The fact that SMEs have seen an 8% rise in exports in 2006 compared to 2005 highlights the potential growth for factoring. In India only 3,000 companies i.e. a small fraction of the existing 12 million SMEs are utilizing this innovative method of financing. Hence there is still a lot of potential to be tapped by the factoring companies.

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