Factoring is one of the most critical and fastest financial instruments in times of crisis. Three products under one umbrella:

We provide financing facilities and collection to improve the cash flow of the exporter. We provide 100% credit protection against bad debts and customer insolvency. The exporter can offer his buyers more competitive payment terms through factoring, thus expanding the overseas markets and increasing business turnover. Factoring ensures liquidity, security, and collection service for our SMEs and corporate clients during the pandemic as a sustainable, crisis-proof, and flexible financial tool.

Because there is a request for credit cover, there is a demand for low-cost funding, there is a need for collection and follow up on buyers coming from the continents, coming from the countries, and coming from the companies.

Cagatay Baydar, General Manager, TEB Faktoring, Turkey

In the context of the expected dominant role that SMEs will play to ensure optimisation of the gains of the African Continental Free Trade Area (AfCFTA), in which trading started on 1 January 2021, access to finance even becomes more critical, and factoring is that viable alternative source of finance in our view.

SMEs constitute the most significant proportion of Africa’s industrial fibre, accounting for about 80% of businesses and employing not less than 70% of the continent’s workforce. Given that access to finance remains a key constraint to SME operations, the availability of trade finance to SMEs through factoring will be a key lubricant to propel the AfCFTA towards realising its aspirations. It is projected to usher in a new era of African trade with the potential of Intra-African trade witnessing the most significant exchange of value-added products that will contribute significantly to the continent’s industrial development and structural transformation.

Kanayo Awani, Managing Director, Intra-African Trade Initiative, Afreximbank, Egypt

All along these years after providing international factoring services at Banco Supervielle, one of the features that always stands out among our exporting SMEs is the satisfaction and gratitude for accompanying them in their international business with a service that allows them to open doors and improve their business offers while obtaining immediate working capital, that from a traditional financing perspective they would not be able to get.

Marina Azzara, Leader - International Factoring, Banco Supervielle, Argentina

The proof of the protective effect of factoring is in the case of claims and payment under guarantee. That means when you are near to insolvency. You can find for clients ways to find solutions. So, in the end, this protection is key and let me say that it’s difficult without factoring or working capital solutions, like factoring supply chain. But if you’re not present, if you don’t have the support of credit insurance, in the end, you can’t do it alone. So in challenging situations, or business, it can be beneficial.

Our business brings a lot of continuity to our clients, and that’s the main point of the three/four effect.  And it is truly in the real economy. So that’s why we know our clients better and better the payment terms than maybe some competitive products within the banks? So these are the two elements that, in my view, are keys to success for our industry.

Patrick de Villepin, Chairman, BNP Paribas Factor, France

We have seen many cases where Sellers have used factoring as a tool to increase credit appetite, change payment terms and expand to new geographies and buyers.

In a particular case, the credit terms of a large automobile company were backed by Letters of Credit. The buyers were unhappy as the LC required them to block much-needed working capital, cost more, and be operationally intensive. However, the bank looked at their strong track record and growth potential and gave them a factoring credit line, which enabled overall cost reduction for the Seller and their Buyers.  

In another case, a large telecom provider in Asia was bidding for a new business with a large buyer. While both the parties were reputed, the seller required credit protection on the buyer as this was the first time they were selling to this name. The bank pitched in with the solution and arranged for credit protection to help them conclude the deal.

Factoring thus builds trustful relations.

Vijay Vashist, Group Head - Product Management, Transactions Banking, Emirates NBD

Recently, many exporters using Cash in Advance or LC have requested buyers switch to TT deferred payment when they plan to increase sales to the importers. If the exporters do not accept this change, they may lose business. In such cases, we recommend the sellers introduce export factoring. If a factor approves a credit line, the exporters can change to TT deferred payment by using export factoring. Furthermore, if the exporters would like to receive funds immediately, they can use invoice discounting services offered by banks or the export factors. This is the feature of export factoring that we recommend the most for SMEs around the world.

Toshiyuki Hirata, Deputy General Manager, Mizuho Factors, Japan

Recent months have been one of the most challenging times for businesses, as well as business leaders, across the world. Heightened risk environment, liquidity, business sustainability, supply chains and sales velocity have all been impacted, unlike anything seen before. In the Middle East region, factoring has allowed our clients to monetize their trapped receivables and helped them with liquidity issues during the crisis.

Many clients faced an adverse impact of lockdowns where their sales were impacted, but they still had to pay for their working capital needs and overheads. Factoring, an apt solution, allowed them to stay competitive and assured liquidity.

For example, one of our clients, a large Hospital chain, had receivables from their insurance companies which were usually delayed. The suppliers, on the other end, wanted quicker payments, as their products were in-demand. As a result, this client used factoring as a working capital tool and helped them with upfront liquidity to meet their immediate working capital needs.

Factoring assisted our clients in better predictions of their supply chain and cash flows. In addition, it provided necessary credit cover to help them focus their resources and time to meet their business needs. In tough credit times, features of cross border factoring that provides 100% bad debt protection against buyer risk came in handy to continue to sell on a secured basis.

Vijay Vashist, Group Head - Product Management, Transactions Banking, Emirates NBD