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Factoring

Factoring. Key Figures & Trends. Erik Timmermans, rep. Secretary General IFG G-Nexid Workshop, Geneva 28 March 2014. What is Factoring / Commercial Finance?.

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Factoring

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  1. Factoring Key Figures & Trends Erik Timmermans, rep. Secretary General IFG G-Nexid Workshop, Geneva 28 March 2014

  2. What is Factoring / Commercial Finance? • General definition: A range of working capital solutions designed to provide day to day operating business finance for commercial organisations • Basic definition: Provides cash against customer invoices • Descriptive definition: Factoring may include: • Sales Ledger Administration • Collection • Credit Insurance

  3. Why is this industry important? Support for (in particular SME) business to develop and grow Support for export development Creating and supporting employment Efficient economic growth

  4. Average Client Turnover, Europe

  5. Evolution of World Factoring Turnover 1980 : +/- 50 billion € 1990 : +/- 200 billion € 2000 : +/- 600 billion € 2012 : +/- 2.120 billion € The industry has grown 4 times faster than the World economy over the last 30 years…

  6. Factoring in the World 2012 Europe 1.257 (59%) (1.173 EU) Asia 581 (28%) NorthAmerica 91 (4%) Africa & Middle East 32 (2%) South America 93 (4%) Australia & NZ 64 (3%) Total World: €2.119 billion (+8%) Source: IFG GIAR 2012

  7. Key Industry Figures • Turnover 2012 : 2.119 billion € • + 8 % compared to 2011 • Approximately 2.700 factoring companies But 1.200 in USA and over 500 in Brazil… • Financed amount at year end : 309 billion € • Factoring Clients : 496.000 • Factoring Debtors : 13.500.000 (rough estimate) • Employees : 46.000

  8. Market Shares 2012 (GIAR IFG)

  9. Market Structure Concentration : Combined market share of 5 biggest factoring companies in each country On average 84% Bank dominated: Combined market share of Top 5 in each country49 % : bank subsidiaries44 % : bank divisions

  10. International Factoring Support of SME’s in open account trade

  11. International Factoring • 62% of World Factoring turnover is reported as Domestic Factoring • Cross-border factoring continues to grow more rapidly than domestic factoring • Either Direct Export Factoring (Factoring Company deals itself with foreign buyers) • Or Two-Factor system (Export Factor uses services of Import Factor in buyer’s country)

  12. The Two-Factor System Import Factor Export Factor IF exchange: Electronic exchange between factors Credit protection & Collection by Import Factor Factoring agreement: Prepayment of invoices/ credit management Invoice collection and debtor credit approvals Supplier Debtor Delivery of goods & services

  13. Benefits of the two-factor system for the Exporter 100% protection against the buyer’s inability to pay on 90 days past due. Increased sales in foreign markets by offering competitiveterms and conditions of payment. Credit lines are in place for buyers, which speed up response time for orders and re-orders. Accelerated cash flow through faster collections. Elimination of time-consuming administrative burden or delays linked with the negotiation of Letters of Credit.

  14. Benefits to the Buyer Purchase on convenient “Open Account” terms. Expanded purchasing power without using existing credit lines. Orders can be placed swiftly without incurring the delays, complications and cost of opening Letters of Credit. No additional commission for buyers.

  15. Role of IFG

  16. IFG Started in 1963 Members in more than 60 countries Representing the Commercial Finance Industry worldwide (Factoring, Invoice Finance, Asset Based Lending)

  17. Connect Creating Business Opportunities for Members through Two-Factor platform and other cross-border business solutions. Global association but regional approach through Chapters (Asia, Latin America, Africa, Central East Europe) Partnering with like-minded associations (CFA USA, ADFIAP, national associations…) and international organizations (EBRD, EIF, CFEC, …) Connect members with specialized service providers (IT, Legal, Risk, Consulting…)

  18. Educate Developing Talent in Factoring Industry E-learning in different languages University certificated Course on Finance International Trade & Commercial Finance Leadership Business game Mentoring and Consulting

  19. Influence Research and Statistics Center Access to networking & Learning Defending the industry with policy makers : • EU Federation for Factoring & Commercial Finance • Co-operation with CFA for harmonization • Draft Model Law on Factoring

  20. Thank you for your attention! Questions? More info on www.ifgroup.com

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