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The Benefits of
factoring Presented by
1 What is factoring?
2 The different types of factoring
3 International Factoring Association
4 How does factoring work?
5 Risk Management
1
What is factoring?
What is factoring?
• Invoices vs. factors
• Factoring vs. Bank loans :- Financial Assets(Accounts receivables)- Receivables value- Parties involved
The current state of factoring market
Europe (66%)
Asia-Pacific (25%)
North America (4%)
South America (4%)
Africa (1%)
2014 2015 Variance
Europe (66%) 1 462 585 1 557 202 6%
Asia-Pacific (25%) 648 711 596 513 -8%
North America (4%) 103 501 100 530 -3%
South America (4%) 103 124 93 644 -9%
Africa (1%) 14 735 13 487 -8%
TOTAL 2 346 143 2 373 003 1%
FCI Global factoring Statistics 2015 by Region (all figures given in millions of Euros)
2
The different types of factoring
The different types of factoring
• Factoring is a financing technique whose type differs from one company to another. Indeed, there are different types of factoring such as:
Les types de services
d’affacturage
Classic Factoring (ou full
factoring)
Factoring in management
mandate ‘line by line’ (delegatedmanagement)
Repruchase the balance
Reverse Factoring
Factoring international
contracts
Factoring and Securitization of trade receivables
3
International Factoring Association
International Factoring Association (IFA)
• Help factoring community
- Information- Training- Resources required- Meetings, Conferences
4
How does factoring work?
How do we work?
The Process
Factoring benefits
FACTORING =
1) Financial Leverage
2) Improved management of accounts receivables
3) Tax deductible
= Release cash + Save time + Concentration on the main activities
= ACCELERATE YOUR GROWTH
Customer selection criteria
Opening documents:
- Administrators- Support Information- Supplier information- Banking information- Tax information- Information on accountsreceivable
Documents required:(after opening)
- Completed account opening documents- Acceptance letter from a mortgage by the bank- Mortgage Commitment Documents- Service contract- Specimen cheque- Change of Beneficiary Letter (seller)
The guarantee of trade receivables
Before the sale:(Prevention)
- Customer Selection- Investigations into the solvency of any new debtor- Definition of credit remedy and approval of factor
After the sale:(Surveillance)
- Ongoing monitoring of the accounts receivable quality- Review of information obtained from privileged sources (Equifax, Transunion, etc.)- Monitoring of the company's financial situation
The principal terms of a factoring agreement
• SALE OF ACCOUNTS RECEIVABLE
• REPRESENTATIONS AND WARRANTIES
• OBLIGATIONS OF THE SELLER
• EVENT OF DEFAULT
5
Risk Management
Risk Management
Credit Management
System
DashboardMonthly financial analysis
32
1
1) Credit Management System
Security : • Implementation of a control system
Vigilance : • Unauthorized activity can be detected
Flexibility : • The factor must be able to act quickly in crisis situations in order to minimize the impact
2) DashboardThemes Risks
Client risk assesment :• Credit analysis• Advances on accounts
receivable• Insurance, public liability and
merchandise
Very High
Access to information :• Monthly financial analysis• Internal communication• Newsletters
High
External• Competitors actions/ industry• Brand Management• Legal issuesInternal• independent monitoring
evaluation• self-identified problems
Moderate
Management Team:• Risk management• Performance• People (Expertise)
Very high
Objective:
• Limit the risks associated
with the insolvency of a
customer
Frequency:
• Updated monthly
Method:
• Sharepoint Dashboard
Content :
• Credit analysis
(Equifax/Transunion)
• Advances on accounts
receivables
• Debtors concentration
3) Monthly financial analysis
Objective: • Constant contact
Méthode : • Monthly e-mails
Content :• Newsletter• Initiatives• Indicators
5 0 0 P l a c e d ’ A r m e s
S u i t e 1 8 0 0 • M o n t r é a l Q C
H 2 Y 2 W 2 • C a n a d a
T 4 3 8 2 5 9 3 2 0 2 F 4 3 8 2 5 9 3 3 0 1
i n f o @ m o n t r e a l h e r i t a g e . c o m
Thank you!
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