Factoring, Debtor Finance, Invoice Discounting Consultants In Australia
Factoring: Concept, Evolution Developments and …...recourse, Invoice Discounting, Single invoice...
Transcript of Factoring: Concept, Evolution Developments and …...recourse, Invoice Discounting, Single invoice...
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Factoring: Concept, Evolution
Developments and Challenges
Peter Brinsley
Director, POINT FORWARD LTD
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Evolution - Early History
• Origins in international trade. Factors acting as agents.
• “Modern” factoring started in the USA in the 20th Century. Mostly textile business.
• 1960’s – the concept was exported back to Europe by American factors
• 1963 : Foundation of International Factors Group
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Recent History
– Significant growth in Europe – Start of invoice discounting
1980s
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Recent History
– Significant growth in Europe – Start of invoice discounting
– Development in Asia, Central East Europe, Latin America – Asset Based Lending (ABL) in USA and later also UK – Less full service / more focus on receivables financing
alone : evolution towards “Commercial Finance”
1980s
1990s
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Recent History
– Significant growth in Europe – Start of invoice discounting
– Development in Asia, Central East Europe, Latin America – Asset Based Lending (ABL) in USA and later also UK – Less full service / more focus on receivables financing
alone : evolution towards “Commercial Finance” – Further growth / more Bank-driven – Diversity of products : Factoring with recourse, non-
recourse, Invoice Discounting, Single invoice factoring, ABL, Trade Finance Products such as Reverse Factoring, Supply Chain Finance
1980s
1990s
2000s
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Commercial Finance today
Invoice Finance Asset Based Lending Trade Finance products
Non-recourse Factoring Receivables and other Assets
Reverse Factoring
With Recourse Factoring Supply Chain Finance
Invoice Discounting SWIFT BPO (Bank Payment Obligation)
Portfolio & Transaction based
Portfolio based Transaction based
Common to all forms of Commercial Finance : It’s SECURED AND MONITORED FINANCING
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Evolution of World Factoring Turnover
0
500
1000
1500
2000
2500
Billions USD1980
€50bn
1990 2000 2012
€200bn
€600bn
€2120bn
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Africa & Middle East
32 (2%)
Asia 581 (28%)
South America 93 (4%)
North America 91 (4%)
Europe 1.257 (59%)
(1.173 EU)
Australia & NZ 64 (3%)
Total World: €2.119 billion (+8%) Source: IFG GIAR 2012
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Factoring in Africa
0
5,000
10,000
15,000
20,000
25,000
0
500
1000
1500
2000
2500
3000
2007 2008 2009 2010 2011 2012 2013
Egypt Mauritius Morocco Tunisia South Africa
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What do we mean by “factoring” ?
• A purchase of receivables by the financier – Factor takes ownership of the debt
• Target market is SMEs / mid-corporates • Suitable for B2B trade • Different from lending against receivable • Factoring allows you to finance more
because of risk mitigants – Greater understanding & close monitoring of the
receivable
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What do we mean by “factoring” ?
• Factoring offers - Finance - Receivables administration - Collections - Protection against bad debts (= non recourse)
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Developments
• Global shift to open account trade Global imports (Trn USD) 50
40
30
20
10
0 2011 2020
Open account Documentary trade
18%
82%
14
9%
91%
31 +8.7%
Revenue pools Bn USD
100
80
60
40
20
0 2011 2020
Open accounts Documentary trade Payments
10.5
22.9
5.2
31.2
25.0
13.5
38.7
+80%
69.6
Source: SWIFT, ICC, ITC, BCG
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Developments
• Traditional trade instruments stagnating
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
in b
illio
n U
SD
LCs World Factoring Volume Open Account
14.000
2.730
1978 - 2012
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Developments
• Factors expanding the product range and looking for new opportunities – ABL, SCF, Single invoice factoring – Interest in emerging and developing markets – Opportunities for significant growth and
revenues
• Initiatives with factoring legislation in Africa – IFG’s model law, OHADA
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Challenges: for traders
Access to working capital – Banks not lending – Securities demanded by Banks not attractive – Loans, if available, do not reflect growth
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Challenges; for Factors
Legal Environment 1. There is a need for clear
and non-disputable laws on assignment of present and future receivables
2. There is a need for priority rules in favour of the factor in case of bankruptcy of the client
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Challenges: for Factors
Regulation – there’s good and there’s bad
X
Allows competition Applies minimum standards Helps position a credible and sustainable industry Excessive control Restricts competition Stifles innovation Cost and resource
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Challenges: for Factors • Industry image • Marketing • Education
• of the market • your parent bank • your staff
• People • Skills • IT systems
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Challenges: for Factors • Credit information • Credit insurance • Risk processes and procedures • Getting your money back
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Thanks for your attention Merci pour votre attention
Questions ?