The most popular forms of financing business activity in Poland

Doing business in Poland is becoming more and more common. Both citizens and foreign investors are making the decision to start their business. Therefore, it is worth to briefly discuss the most popular forms of business financing available on the Polish market. The characteristics of these forms are made by Paweł Dyrduł, lawyer from KG Legal Kiełtyka Gładkowski Sp.p with its registered office in Cracow.

Division of forms of financing

Forms of financing business activity can be divided in terms of many criteria. However, the basic division is the division into internal forms and external forms. As the name implies, internal financing is based on increasing the capital of an enterprise by looking inside it. External financing is, in turn, the conclusion of contracts with entities operating on the market, which, under appropriate conditions, agree to make available to the enterprise financial means for running a business.

Internal forms

Among the internal forms of financing the activity for the mention deserve:

  • Contribution of existing or new co-owners
  • Release of the company’s capital
  • Profit hoarding

In order to finance a new investment, co-owners of the company may decide that they will help the company with financial means. Contributions from this title come from the private resources of the co-owners and are transferred to the bank account of the enterprise.

Release of capital is the sale of unnecessary assets. When a company owns, for example, real estate, machinery, vehicles that are no longer profitable, it is re-selling to other entities. This allows the company to simultaneously get rid of unnecessary, costing assets and gain financial means.

Profit hoarding means retention in an enterprise, resulting from the distribution of net profit, profit earned in a given financial year. Retained earnings are important information in the context of assessing the ability of a subject to self-financing. It is a component of equity but is disposed of. It can be divided into several capital categories such as reserve capital, reserve capital, resources.

External forms

The external forms of business financing, as already mentioned, are based on the acquisition of financial resources, assets from external entities not affiliated with the company. The most popular are: bank loan, merchant loan, factoring, leasing, franchising and more.

Bank credit

Bank loan is the provision of cash by the borrower’s bank. This is based on a loan agreement between the parties. Financial resources are available only for a limited time and for the purpose indicated in the request. The company is obliged to repay the loan installments together with the interest and commission owed to the bank. You cannot change the purpose of the loan. The lender has the right to monitor the use and repayment of the loan.

For businesses, loans can be divided into two types, depending on which business they are financing:

  • Working capital loan – financing current business activities, providing liquidity (overdraft facility, credit account)
  • Investment loan – long-term loan, financing the company’s long-term goals, is indicated for the modernization, reconstruction of the company’s assets, acquisition of machinery and equipment, financing the purchase of intangible assets;

Merchant loan

A merchant loan is based on an agreement between two parties: the seller of the goods or services and the buyer. It consists in the fact that the seller decides to deliver the subject of the sale contract to the buyer and at the same time defer the payment deadline. The use of this type of loan is a common economic practice popular especially among cooperating entities. The length of the crediting period, and therefore the date of payment for the goods, depends on the type of purchased good. In the case of consumer goods it usually amounts to several weeks. However, if a company acquires a capital good, the crediting period may be several years.


Factoring is often called credit under invoices. It consists in discounting the invoice file by the trader. Factor (eg bank) decides to purchase receivables created by the factor (trader) for supplies of goods and services. Factoring is the sale by the trader of factoring receivables. Sold receivables are usually short-term. The factor is obliged to pay the invoice for the invoice, and from that moment he is the creditor for the entities listed as debtors on the invoices. This means that the debtor fulfills the factoring factor.

Factoring involves the risk of receiving a debtor’s payment. Hence we distinguish two types of process:

  • Proper (full) factoring – assumes the entire risk of the debtor’s solvency, there is no factoring of the right of recourse
  • Inappropriate (incomplete) factoring – a factor retains the right to recourse, it means that in a situation where the debtor becomes insolvent the claimant may demand payment of the invoice from the invoice


Leasing is one of the most popular forms of business financing. It consists in concluding an agreement between the two parties: the lessor and the lessee. The subject of the lease is a fixed asset (such as a machine, a car), which is put into use by the sponsor. The user is obliged to pay the lease installments within the agreed time limits. The most common forms of leasing on the Polish market are: operating lease and finance lease.

The characteristic that constitutes an operating lease is that fixed assets that are the subject of the lease may be re-leased to other users after the contract expires. This means that the beneficiary does not acquire ownership of the leased asset at the end of the contract period. After the contract expires, the subject of the lease must return to the sponsor. Hence, it can be concluded that the operating lease agreement is concluded for a shorter time compared to the economic life of the facility. A risk-bearing party (such as theft, accidental damage, technical defects) is the sponsor. It also covers the costs of depreciation, repairs, insurance of the object.

Financial leasing, on the contrary to operating lease, characterizes the duration of the contract equal to the economic cost of the facility (full depreciation). Upon the termination of the lease, the beneficiary acquires the ownership of the leased asset. This means that the contract is made on a long (depending on the type of asset) time. It is also not possible to terminate the contract by both parties by the so-called. Base period, which accounts for 60-80% of the life of the asset. In this type of leasing the party that is the risk and the current costs of repair and insurance of the object is the beneficiary.

Leasing is exceptionally popular among new entrerprises. At the beginning of business, they do not have sufficient funds to acquire the asset. Using a leased asset does not result in an increase in the value of fixed assets in the company’s balance sheet. Depreciation charges on a leased asset can be charged to the user. The entrepreneur will also be able to use the so-called. Tax shield, because leasing installments lower the tax base.


Franchising is based on concluding a franchise agreement between the franchisor and the franchisee. The franchisor undertakes under the contract to grant franchisee rights. In this way, the franchisor obtains within the close and continuous cooperation between his company and the franchisor’s company the right to use the brand and the franchisor’s trademark. He is obliged to pay the license fee. The Franchisee provides the franchisee with the flow – in addition to rights – of know-how, technology, and sometimes also equipment, goods, site decoration and the necessary commercial assistance.


Other forms of financing business activity in Poland may be:

  • Loans
  • Subvention
  • Subsidiy
  • Funds from EU
  • Issuance of securities, eg bonds

Abstract: Business law, enterprise, banking, finances

The article was prepared by KG LEGAL KIEŁTYKA GŁADKOWSKI based in Cracow, Poland, specialising in cross border cases, with its focus on new technologies, IT and life science. It discuesses the most popular forms of financing of business activity in Poland.

Paweł Dyrduł, lawyer (specializing in banking law, financial law) from KG LEGAL KIEŁTYKA GŁADKOWSKI – PARTNERSHIP office in Cracow, specializing in cross border issues and servicing life science and IT companies, discusses characterized the most popular forms of financing business activity in Poland.