The Senate has advanced a bill aimed at establishing a legal framework to facilitate transactions between large corporations and Small and Medium Enterprises (SMEs).
The proposed “Factoring Assignments and Receivables Financing Bill 2023,” sponsored by Senator Tokunbo Abiru (APC, Lagos East), passed its second reading on Thursday.
This legislation seeks to ensure transparency, legal certainty, and protection for both creditors and debtors, enhancing access to capital and credit.
Senator Abiru, during his presentation, explained that the bill would allow SMEs to transfer their contractual rights to payment from debtors to a third-party factor. This factor would then manage the collection of receivables, providing immediate cash flow to the SMEs.
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Abiru emphasized that the bill would significantly benefit SMEs by enabling them to secure financing from banks and financial institutions based on supply orders from larger corporations.
Senators unanimously supported the bill, recognizing its potential to support SMEs working with major companies like Nestle and Cadbury, which often operate on credit terms.
In a post-session interview, Abiru noted that debt factoring offers SMEs a formal structure to convert receivables into cash, enabling smoother business transactions with large corporations.
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