Transcript The World of Factoring

Factoring : Definition
Factoring is a specialized financial service, offered either by a subsidiary/division of a
bank or an independent provider that offers a range of services to a business based
on their clients accounts receivable.
A factor provides some or all of the following basic services:
Factoring & Invoice Finance Variations
Full Service (non-recourse) Factoring
With Recourse Factoring
Invoice Discounting
International Factoring:
• Direct Export
• Two-Factor Export
Reverse Factoring / Supplier Finance / Approved Payables Finance
Asset Based Lending
How it works
Serving Suppliers that Sell to Businesses Globally
1
Buyer places
an order with
supplier.
2
Factor evaluates
credit worthiness
of buyers.
Factor approves
the buyer.
Suppliers are referred to as “sellers”
Retailers/debtors are referred to as “buyers”
3
Supplier ships
products to
buyer.
4
Supplier invoices
customer and
assigns invoice to
Factor who pays
supplier with
reserve
5
Factor collects
funds from buyer.
Factor pays
supplier difference.
ADVANTAGES OF INTERNATIONAL FACTORING
Seller
• One export factoring agreement covers credit risk of buyers in several countries
• Communication is in local language
• Collections and sales ledgering are handled by factors while seller focuses on core activities
• Does need to be familiar with trade or law of buyer country
• Obtains credit information on buyer
Buyer
• Communication is in local language
• Pay invoices locally in the most efficient and cheapest way
• Can trade on Open Account terms and avoid cost of letter of credit
Export
Factor
• Offer seller export factoring without setting up operation in a large number of countries
• Import Factor takes credit risk on the buyer
• Import Factor performs collections
• Import Factor takes legal action on buyers if required
Import
Factor
• Import Factor is able to generate business through Correspondent Factoring
• Import Factor can increase portfolio of buyers
Factoring : why does it matter?
Support for (in
particular SME)
business
to develop and grow
Support for export
development
Efficient economic
growth
Creating and
supporting
employment
Low risk for the
Financial Institution
Global Factoring Volume 1995 - 2015
(IN EURO BILLIONS)
€ 2,500
€ 2,000
€ 1,500
€ 1,000
€ 500
€1995
2000
2005
International
Domestic
2010
2015
Factoring in the World 2015
Europe
North America
1.557 (65,6%)
(1.471 (62,0%) EU) Asia-
101 (4,2%)
Pacific
South
America
Africa &
Middle East
17 (0,7%)
93 (3,9%)
Total World: €2,373 trillion (+1,1%)
FCI data
605 (25,5%)
Market Shares 2015
Total in € Bn
Market Share
GDP Penetration
UK and Ireland
402.6
17.0%
14.1 %
China
352.9
14.9 %
3.5 %
France
248.2
10.5 %
11.1 %
Germany
209.0
8.8 %
6.8%
Italy
190.5
8.0 %
11.3 %
Spain
115.2
4.9 %
10.4 %
USA
95.0
4.0 %
0.6 %
Netherlands
65.7
2.8 %
9.7 %
Belgium
61.2
2.6 %
14.6 %
Japan
54.2
2.3%
1.4 %
1794.5
75.8%
4.2%
Top Ten
Source FCI, IMF GDP estimates
Key Industry Figures 2015
Turnover 2015 : €2.374 billion
+ 1,1 % compared to 2013
Approximately 2.500 factoring companies
Financed amount at year end : €360 billion
Factoring Clients : 570.000
Factoring Debtors : 18.000.000 (rough estimate)
Employees : 56.000
Average Penetration : 3,8 % of World GDP
Market Structure
Concentrated:
• Combined market
share of 5 biggest
factoring companies
in each country: on
average 82%
Bank dominated:
• 48 % : bank
divisions
• 30 % : bank
subsidiaries
• 22 % : non-bank
finance companies
FCI MEMBERS TWO-FACTOR VOLUMES
last 15 years - in millions of euro
70000
60000
50000
40000
30000
20000
10000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
FCI MEMBERS : 400+ IN 90+ COUNTRIES
FCI+ Members active in Two-Factor
FCI+ Members not active in Two-Factor
Coming Events
 48th Annual Meeting :
• Cape Town, South Africa : 23-29 October 2016
 Regional Conferences & Promotion Seminars:
• Practical FCI Workshop on International Factoring
in cooperation with EBRD, 21 September, Frankfurt,
Germany
• Regional Conference On Factoring & Receivables
Finance In The Middle East, 29-30 November,
Dubai, UAE