For companies that have as customers the various public administrations in Spain, the Average Payment Period to Suppliers ("PMP") is a relevant magnitude, especially in times of crisis: if the administrations they have as customers are late in their payments, and generally they are usually customers with a significant volume of invoicing for the company's balance sheet, they can jeopardize the liquidity and solvency of the company that has offered its products and/or services.
Let us recall that Law 15/2010 established in 2013 a maximum supplier payment period of 30 calendar days for the public sector and 60 days between companies. However, nine years later, the civil service continues to have problems meeting these deadlines; according to Treasury data, the average payment period (PMP) of the Central Administration is 40.9 days.
Another example of the difficulties that companies have to collect money from the public coffers in due time and form comes from the historical debt that Local Entities have accumulated. In this regard, last January the Treasury announced the implementation of an extraordinary mechanism (regulated by the General State Budget Law for 2022) so that Local Entities can speed up their payments to suppliers and cancel their oldest payment obligations. According to the Treasury's estimate, there are 1,640 local entities affected by this measure, most of them city councils with outstanding debts.
In this context, factoring can be a very useful tool for companies, particularly for those that cannot afford to wait an indefinite period of time to receive payment for their services. How? Through factoring, our clients can assign their invoices with the Administration to us: we advance the money owed to them in the form of financing, and we take care of collecting that amount, acting as a financial intermediary.
Thanks to this tool, we not only manage to shorten collection periods for companies, but also provide them with immediate liquidity. At the same time, we help these companies to diversify their sources of financing, and we do so in a totally digital way, since the operations are managed through our technological platform.
At Finalbion we have been participating in factoring operations since 2016; thanks to our services, we have helped finance more than 250,000 invoices for our clients for a cumulative amount of more than €830 million. You can find out more about our factoring line through this link.
