Problems for entrepreneurs
One of the main inconveniences faced by entrepreneurs is that even if they have not yet received payment for a service rendered or products delivered, they still have to pay income tax and VAT.
It’s easy to imagine a situation in which a small businessman will have to pay several thousand zlotys in tax, while he hasn’t received a single zloty from contractors who still have time to pay their obligations under the invoices issued.
EXAMPLE
Ms. Clare runs a carpentry shop, where she has worked alone until now. At the beginning of the year, she decided to hire two people to process orders from customers more quickly. By dividing the work among three people, she has been able to accept and complete many more orders in recent weeks than in the previous corresponding period. Clients expect Ms. Klara to have at least 60 days to pay invoices, which, with such a workload, means that she will have to pay her employees twice before she gets paid for the orders she completes.
The problem described above is not the only threat. Another circumstance that can make it difficult to maintain liquidity is that Ms. Klara’s company usually handles orders for new clients – the inability to carry out detailed verification of contractors can lead to payment bottlenecks. Unfortunately, not all customers pay their invoices on time.
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How does factoring for industry solve these problems?
Invoice financing for industry
If an entrepreneur issues invoices to various customers and happens to wait for payment after the due date, he can use an invoice financing service. The terms of similar services vary depending on the rules of the companies providing them, but they always allow to achieve specific benefits.
Important!
Only receivables that are not past due can be sold under factoring.
Online invoice financing involves an entrepreneur waiting to be paid by a counterparty to sell an invoice to a factoring company (i.e. a factor) – to do so, he submits an application online. The system processes the application (often even in a few hours – much faster than in the case of loans) and sends the terms to the customer. The customer accepts the terms of redemption via SMS, and the factor immediately transfers the funds to the entrepreneur’s account, charging a small commission.
EXAMPLE
Ms. Clare has few regular clients, and as a result, she often provides her services to new contractors. She decided to take advantage of invoice financing at PragmaGO. She applied online and received a decision the same day. Thanks to the confirmation of the terms and conditions by SMS, the invoice payment appeared in her account as soon as the recipient confirmed the legitimacy of the document, which allowed Ms. Klara to maintain liquidity and plan further moves in the company.
At PragmaGO, after submitting the first application, we automatically set up a client account and grant the entrepreneur a limit of funds (up to PLN 100,000) – from now on, the client can sell invoices for a total amount not exceeding the limit.
Factoring for the industrial sector
The online factoring service is slightly different from invoice financing – the main difference is that factoring can be used by a company when it issues sales documents to regular customers. In this variant, the entrepreneur also submits an application entirely online, but this time he reports all the contractors with whom he regularly does business. In response, he receives a limit (from 50 thousand up to one 15 million zlotych!) and, in exchange for a fixed monthly fee, gains access to funds that, were it not for factoring, would be frozen and unavailable.
Important!
PragmaGO’s online factoring also includes free customer insurance and a payment monitoring service.
