Factoring is an instrument enabling an enterprise to increase the efficiency of receivables and the working capital management. By means of this service, the enterprise minimizes the level of receivables while not decreasing the attractiveness of the sales terms. When a supplier uses factoring, he frees his frozen funds that can be used to expand the business. This service leads to a reduced need of the company for working capital and external funding and it contributes to the company's increased cash liquidity, thus increasing its ability to settle its accounts payable.

Factoring, being a flexible source of financing the company's current activities, is becoming ever more popular in Poland. An increased interest in this service is fostered by a currently visible process of financial degradation of many enterprises, expressed by the difficulty with maintaining current liquidity. Delays in settling payment liabilities by enterprises has become a permanent trend in the economy and a way of financing the need for working capital.

The article presents legal and fiscal aspects of factoring. It discusses the legal aspects of providing the service, the nature of receivables subject to redemption and the limitations of factoring ensuing from the agreement between the supplier and the customer. It also touches on the fiscal issues in the light of the income tax acts (PIT and CIT) as well as the VAT act.

Different types of factoring depending on the extent of the risk of debtor's insolvency borne by the factor have been presented further on in the article. Furthermore, two models of factoring commonly used by factoring institutions were presented.

Later on, the article presents factoring as an instrument providing the companies which use it with extensive possibilities of receivables and working capital active management, and thus having an impact on the improvement of their financial indexes and the balance sheet structure.

Further on, the article presents the advantages and disadvantages of factoring for the factoree through an analysis of the economic and fiscal aspects associated with this financial instrument.

It presents also the factoring services market in Poland, with a special focus on opportunities and its growth potential as well as on the factors negatively influencing the contractors' interest in this sector's offer.

The paper was developed on the basis of books devoted to the development of the factoring services market in Poland, newspaper articles found in journals and monthly magazines about the legal and fiscal issues as well as information obtained from other sources such as web sites of factoring institutions and promotional materials provided by factors.