Factoring: How Companies Secure Supplier Financing

Here’s a breakdown of the issues hindering factoring growth in Peru, as detailed in the provided text:

1. Cash Invoice Requests for Tax Evasion:

* Companies are requesting cash invoices from suppliers, ostensibly to delay the factoring process.
* Though, a key motivation is to deduct these invoices for Income Tax (IR) calculations without registering them with Sunat (the tax authority). This avoids greater scrutiny.
* There’s also a lack of awareness among invoice issuers who readily accept cash payments.

2. Supplier Payment Delays Linked to Company Systems:

* Companies are deliberately delaying payments to suppliers, tying them to the company’s own internal system registration or tax deduction processes.
* This practice isn’t legally mandated but is used as an obstacle. (“wait until the invoice is registered in my system so you can do factoring.“)

3. Limited access for Microenterprises:

* Factoring companies are hesitant to work with microenterprises, viewing them as high-risk or too much effort for the potential return.
* There’s notable untapped potential to include more small suppliers in factoring arrangements.

4. “with Recourse” Factoring & Supplier Risk:

* The majority of factoring operations are “with recourse,” meaning the supplier remains ultimately responsible for payment even if the financing entity pursues the debtor.
* some financing entities require suppliers to sign promissory notes, further increasing the supplier’s risk.

Impact:

These issues are slowing down the growth of factoring in Peru.While growth is still occurring, it’s at a decreasing rate compared to previous years (13.4% in 2024 vs. 72.8% in 2021).