In the early days, domestic and international factoring were closely tied to the textile and garment sectors. When factoring started to spread, more industries became interested in making use of factoring services. Today international factoring services are used by a wide variety of companies in a wide range of sectors. Below are three FCI case studies.
Thanks to factoring, Step Carpet could significantly increase exports. Step Halıcılık ve Mağazacılık San ve Tic AS is a well known brand of contemporary rugs with boutiques in London, Paris, Milan, İstanbul, New York, Dubai and other design capitals of the world. Step Carpet focuses on the design and manufacturing of modern rugs and home accessories.
Combining traditional rug-making techniques with new technology, Step is a pioneer in the interior design business with innovative collections inspired by the latest fashions, colours and textures.
Step Carpet’s strategy is to expand business to more European markets. The company TEB Faktoring was recommended as Export Factor, introduced by one of their clients, İpliksan Isparta İplik San AS, to Step Carpet, which shares a production facility with them.
New debtors from Germany and the Czech Republic were requiring longer open account terms in place of letter of credits. After a positive assessment, TEB Faktoring was able to offer a full notification export factoring facility to Step Carpet.
In 2012, Step Carpet decided to sign an export factoring agreement with TEB to utilise their international factoring services, which includes the following benefits:
- 100% credit protection against customer insolvency default backed by FCI Import Factors
- outsourcing of the receivables ledger book-keeping workload and local collection services provided by Import Factors abroad
- short-term advances against the factored accounts receivable provided by TEB Faktoring
Since then, thanks to the excellent service provided by TEB Faktoring and its Import Factor correspondents, Eurofactor AG in Germany and Factoring KB in the Czech Republic, Step Carpet has successfully exploited new markets, increased their export business and solidified their supplier relationships. For Step, international factoring has been a useful financial tool which will enable them to generate an additional projected turnover of 10 million euros in 2013
Playshoes Gmbh is a wholesaler of products for babies and children, especially shoes, rainwear, swimwear, accessories and toys. The family owned mid-sized company was founded in 1998 in the south-western part of Germany and the brand is well known for its high quality fashion collections and certified products.
The items are designed and developed by clothing and toy engineers in Germany while the production has been outsourced to external manufacturers in China and Hongkong. The buyers are online shops, mail order companies and specialised retailers in Germany and other western European countries.
In 2009 Playshoes concluded a domestic and export factoring contract with Eurofactor AG, one of the leading German factoring companies. Since then Playshoes has been able to constantly expand its customer portfolio and grow its business volume.
In a meeting with Eurofactor AG it turned out that Playshoes was interested in getting more flexible payment terms from its Asian suppliers. Until then, Playshoes had been obliged to pay 50% of the order volume in advance and the remaining balance under open account terms of 30-60 days. To optimise its working capital position, Playshoes wanted to negotiate with its suppliers open account terms of 120 days for the full invoice amount without making any advance payments.
As Playshoes has a solid credit standing, Eurofactor AG could grant a substantial credit limit on the company, backed by a credit insurance policy. After the company had talked to some of its main Asian suppliers, the two biggest manufacturers showed interest in the two-factor export model. Eurofactor AG then approached two experienced FCI factoring correspondents, DBS Bank Ltd. in Hong Kong and China CITIC Bank in Beijing and introduced the suppliers’ names and business details to them.
After an internal credit investigation and successful negotiation on conditions, the Export Factors could close a factoring contract with the suppliers. Based on the 100% credit risk protection and confirmation by Eurofactor AG to the Export Factors that Playshoes will fully pay the suppliers’ invoices on the due date without any deductions, the export factors are now advancing up to 95% of the invoice amounts to the exporters. This is available on the date when the invoices are assigned to the factors.
Tansactions started at the beginning of 2012 and have developed well since. It is a multiple win-win solution for all involved parties:
- importer Playshoes has achieved the required extension of payment terms which have been partly passed on to its buyers
- exporters in China and Hong Kong are receiving immediate funding against their receivables, an entire risk-coverage facility and the perspective to further increase their turnover with Playshoes.
- DBS Bank has already been able to include further foreign debtors in its export factoring contract with the supplier, backed by FCI correspondents in other countries
In the meantime Eurofactor AG has received requests from Playshoes for further new suppliers in China and Malaysia to be included in the reverse marketing programme.
MAC Carpet is one of the main world leaders in the carpet industry and is a member of an Egyptian group which is amongst the largest private industrial conglomerates in Egypt with diverse activities in numerous fields and MAC Carpet is one of Egypt's top exporting firms with more than 70% of all its total production Exported to more than 107 countries worldwide, including USA, EU countries, Asian countries and Gulf countries.
MAC Carpet was dealing directly with foreign factoring companies for many years to sustain its needs in many of its buyers’ markets. However due to 2008 financial crisis they faced some difficulties as access to finance was shrinking (particularly in US and Canada – their main export markets). At the same time, the risk of buyers’ defaulting was increasing.
This is when the company's management decided to explore alternative options to finance and protect their exports with “Egypt Factors” which is the first Egyptian private factoring company, and a member of “FIMBank” Group.
Professional and reliable
Egypt Factors introduced MAC Carpet to the benefits of dealing with members of FCI (the leading worldwide network of factoring companies), which resulted in a one-stop-shop solution for exports to more than 70 countries at that time, with a full package of services (risk protection, collection and finance). Exporters have the option to pick any combination to match their specific needs.
Based on the credit limits secured by our FCI partners in both Canada and US, Egypt Factors was able to offer MAC Carpet a package of full factoring services.
MAC group has been Egypt Factors client since 2009 till present with uniform performance and proven commitment towards business enlargement.
Therefore and starting 2016, Egypt Factors extended its business relation to the mother company of MAC Carpet.
The Egyptian group is one of the world’s largest carpet, rug and related raw materials manufacturers; with manufacturing factories operating in three countries (Egypt, China & USA) with a production capacity of 143 million m2 and thus ranked to be one of the top 3 largest producers in the world in terms of production capacity.
Such business growth is well supported by the credit limits secured by our FCI partners in Canada, US, Poland and Greece and more countries to come.
Egypt Factors were able to achieve a turnover with the whole group of about $170m since the start of the relation in 2009 till Now (Sep 17).
Given such steady relation, Egypt Factors succeeded to move an extra miles in its business relation and will start to cover the receivables of the group international companies located outside Egypt as to enlarge their access to funding and cover.
Thanks for our FCI’s partners that showed with EGF the passion and services Excellency which lead and still leading to such success story.