Factoring: Interest rates to be reduced by half for a million MSMEs in Peru

The law to strengthen factoring will allow interest rates –set by banks for credits requested by micro, small and medium-sized enterprises (MSMEs)– to be reduced by half, from 30% to 15%, Production Minister Piero Ghezzi estimated.

 

Nowadays MSMEs serving large companies, which are the majority of them, receive bills to be paid within 90 or 120 days, so in order to capitalize they ask loans to banks using such invoice as proof of payment.

 

However, as bills are not considered as securities, he said, banks reject loan applications or approve them by setting annual interest rates ranging from 25% to 30%.

 

Cheap Financing

 

According Ghezzi, the law, which turns invoices into securities, will enable MSMEs to secure cheap financing.

 

"Under this new law –given that bills will become securities– banks will be able to establish that the large company is the debtor and will determine the financing based on that risk," he noted.