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t’s easy for onlookers to forget that Poland has left its Soviet past far behind it to become a standard bearer of the free market economy. Old stereotypes die hard, but the facts speak for themselves. Since 1990, the country has aggressively pursued free market economics, and now, as one of the leading capitalist economies in the world, is widely expected to continue to buck the trend and enjoy sustained economic growth, despite the difficult climate.

With low inflation, sustainable spending and a pro-enterprise government, Poland is one of the strongest economies in the EU. Poland plc grew at roughly 5% until 2008. Then – instead of tying its currency to the euro – Poland took the prescient step of depreciating the zloty when the financial crisis hit. As a result, the country enjoyed 3% growth in 2009, and growth is predicted to continue into 2010 and 2011.

Defying the current economic uncertainty, Poland has attracted considerable foreign investment, and stood alone among EU nations in expanding its output during the recession of 2009 – reporting a 1.7% growth in domestic product. The country is rapidly developing into a powerhouse of European commerce thanks to its links to neighbouring markets, a committed and skilled workforce and comparatively low labour costs. In addition, Poland has seen billions of pounds of EU funding being pumped into the economy in recent times. The net result is that economic growth is expected to accelerate to as much as 2.9% this year as the global recovery gains pace.

Among the SME community, there is increased interest in alternative growth finance options including an exponential increase in the number of companies now considering factoring. A quick comparison of current uptake rates in Poland and more mature European markets reveals the obvious potential for growth in this young market – while the average figure for factoring penetration in Europe is approximately 6.5% and 10.5% in UK in 2009, uptake in Poland was just 3.26%.

Compared to the UK market, the Polish factoring market is in its infancy so many businesses are turning to factoring, having heard about its benefits for the first time. However, more recently tighter credit markets have started play their part as businesses are obliged to consider alternative funding routes should debt finance not be forthcoming. In addition, with late payment providing an additional challenge to businesses in Poland – as in the UK – there’s a growing realisation that factoring invoices can mitigate this risk, whilst providing the necessary cashflow boost.

Whereas in the past only access to funding was important to SMEs, with the evolution of a more sophisticated consumer comes a desire for a more tailored funding facility. Thus, while the core lending offering remains full factoring, more sector specific offers are already emerging and are likely to become more commonplace as the market grows further.

Poland isn’t immune to the global tightening of the credit insurance market and has also experienced increased challenges. In 2009, as many insurance companies refused to extend or give limits, this had an impact on the provision of non-recourse facilities – and meant that many funders providing non-recourse factoring and reverse factoring were obliged to change insurance company. Additionally, recourse factoring facilities that had previously been available for less than five debtors, unlike the UK where facilities are usually based on whole turnover, were no longer being offered.

Significantly, all four new entrants were banks who have branched into the factoring market to enrich their customer offer and capitalise on the opportunities for growth it presents. Yet, whilst 40 banks currently offer factoring as part of their portfolio, with the exception of Bank Millennium who joined in January 2010, the large bank players have, to date, chosen to stand outside PZF (the Polish Factoring Association). This decision skews the official data on the Polish factoring market which is believed to have grown significantly as a whole, although factored turnover for the Polish Factoring Association (PZF) members fell by 8.62% over the same period. With currently only 12 members, PZF has a long way to go to generate the clout of the Asset Based Finance Association (ABFA) in the UK which counts 90% of UK invoice finance providers as members. If Poland is to foster a strong and stable factoring sector, it is essential that it promotes membership of PZF so factors can truly speak with a collective industry voice.

Notwithstanding the recent tragic loss of so many senior government figures, the outlook for Polish factoring in 2010 looks extremely promising. Currently annual sector growth stands at 4.96%. By comparison, the UK invoice finance market shrunk by 8% between 2008 and 2009. Growth could be boosted still further by a more concerted effort from government to cut redtape which has acted as a handbrake on the economy – making it easier for entrepreneurs to set up businesses, employ staff and pay taxes in Poland.

Many British firms have already staked their claim to a lucrative slice of the developing market. Hilton-Baird Financial Solutions has been active in the Polish market for four years, whilst many European funders have also begun to capitalise on the opportunities this market presents, made even more appealing against the backdrop of the current economy. This is just the beginning.