Regulations To Implement Changes To Factoring Act

Factoring is considered an important source of short-term and working capital financing for micro, small and medium enterprises. It enables them to obtain upfront credit for invoices raised, without over-leveraging balance sheets. Factoring is also favourably regarded by financial institutions as this enables them to provide financing to lower-rated entities while taking on the credit risk of much better-rated entities. The Factoring Regulation Act, 2011 (FRA) was amended by the Factoring (Amendment) Regulation Act, 2021 (act), with the intention of encouraging greater participation in factoring by financial institutions as well as by non-financial bodies requiring short term financing for invoices raised in the course of their business.