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CONNECT. EDUCATE. INFLUENCE.
Factoring
Key Figures & Trends
Erik Timmermans, rep. Secretary General IFGG-Nexid Workshop, Geneva 28 March 2014
CONNECT. EDUCATE. INFLUENCE.
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
CONNECT. EDUCATE. INFLUENCE.
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
CONNECT. EDUCATE. INFLUENCE.
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%)
North America
91 (4%)
Europe1.257 (59%)
(1.173 EU)
Europe1.257 (59%)
(1.173 EU)
Africa & Middle East
32 (2%)
Africa & Middle East
32 (2%)
Asia581 (28%)
Asia581 (28%)
Australia & NZ
64 (3%)
Australia & NZ
64 (3%)
South America
93 (4%)
South America
93 (4%)
CONNECT. EDUCATE. INFLUENCE.
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 %
CONNECT. EDUCATE. INFLUENCE.
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
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International Factoring
Support of SME’s in open account trade
CONNECT. EDUCATE. INFLUENCE.
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
CONNECT. EDUCATE. INFLUENCE.
• 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
CONNECT. EDUCATE. 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
Influence
CONNECT. EDUCATE. INFLUENCE.
Thank you for your attention!Questions?
More info on www.ifgroup.com