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Factoring

Key Figures & Trends

Erik Timmermans, rep. Secretary General IFG

G-Nexid Workshop, Geneva 28 March 2014

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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

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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

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Average Client Turnover, Europe

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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…

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Total World: €2.119 billion (+8%)

Factoring in the World 2012

Source: IFG GIAR 2012

North America

91 (4%)

Europe

1.257 (59%)

(1.173 EU)

Africa &

Middle East

32 (2%)

Asia

581 (28%)

Australia &

NZ

64 (3%)

South

America

93 (4%)

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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

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Market Shares 2012 (GIAR IFG)

Total in Mio € Market Share

China 343.759 16,2 %

UK and Ireland 311.156 14,7 %

France 186.494 8,8 %

Italy 181.878 8.6 %

Germany 157.424 7,4 %

Spain 124.036 5,9 %

Japan 98.100 4,6 %

USA 80.000 3,8 %

Taiwan 70.000 3,3 %

Australia 63.291 3,0 %

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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 country

49 % : bank subsidiaries

44 % : bank divisions

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International Factoring

Support of SME’s in open account trade

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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)

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The Two-Factor System

IF exchange:

Electronic exchange between factors

Credit protection & Collection by Import Factor

Export

Factor

Import

Factor

Invoice collection

and debtor

credit approvals

Delivery of

goods & services

Factoring agreement:

Prepayment of invoices/

credit management

DebtorSupplier

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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 competitive terms 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.

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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.

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Role of IFG

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• Started in 1963

• Members in more than 60 countries

• Representing the Commercial Finance Industry worldwide

(Factoring, Invoice Finance, Asset Based Lending)

IFG

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• 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…)

Connect

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• 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

Educate

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• 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

Influence

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Thank you for your

attention!

Questions?

More info on www.ifgroup.com