Factoring Market as an Alternative to Short-Term Lending for Small and Medium Enterprises

Abstract

The presented study analyzes the results of development of factoring operations in Russia over the past two years.

Aim. The study aims to structure the main components of factoring services provided by credit institutions.

Tasks. The authors determine the major prerequisites and measures for the development of factoring services in Russia.

Methods. With the scoring method being used universally, it becomes critical to provide alternative ways for banks to lend money to legal entities. If the performance of an organization falls below generally accepted criteria, a scoring model based on scores or coefficients leads to mass loan rejection. A more personalized approach to lending would make it possible to find a way out of the current situation and support entrepreneurs. This makes factoring an increasingly crucial banking service.

Results. One of the primary distinctive features of the development of factoring loans in the Russian Federation is the weak regulatory framework of factoring. Specifically, there is still no precise understanding of whether these services can be considered as banking operations or not. This explains the division of problems into non­bank and bank factoring problems.

Conclusion. Factoring can be a promising direction of lending for small and medium enterprises and, as a consequence, a tool for the development of the economy as a whole.