Research shows that the European Union (EU)’s factoring market is expanding at a constant and steady pace. The EU Federation for Factoring and Commercial Finance recently released its half year turnover results for the region’s factoring sector. According to these findings, factoring turnover continued to increase in the first half of 2017 – following on from seven years of consecutive growth in this burgeoning market.

As detailed in the EUF report, factoring turnover (total value of gross invoices purchased) in the first six months of 2017 for EU countries reached over 776 billion euro. This represents an impressive year on year increase of 9%. Furthermore, the GDP penetration ratio for the first half of 2017 was 10.4%, compared to 9.6% in the same period of 2016.

According to the Federation, these results indicate that “factoring is now perceived by EU-based companies as one of their main sources of funding” .

The EUF, which includes national and international industry associations that are active in the EU, focuses on improving the availability of finance to business in the region, particularly the SME sector.

Quick recap: what is factoring?

Factoring is a working capital solution that enables companies to raise funds against their accounts receivable. Instead of waiting 30, 60, 90 or 120 days for payments due on credit sales, a business can partner with a factoring company, which in turn advances funds against these outstanding debtor balances.

This not only allows a company to draw much-needed cash back into the business, but also provides the organisation with scalable finance that is tied to turnover rather than fixed assets, such as bricks and mortar. Factoring is therefore an ideal funding strategy for growing businesses, as well as organisations with a seasonal turnover.

With fast and flexible access to funds, companies can meet operational expenses optimally, pay suppliers early and capitalise on trade discounts, take advantage of new business opportunities, and more.

Considering the growth of the factoring market in the EU, more companies should be taking advantage of this well-established and highly beneficial form of financing in South Africa. Here, factoring provides companies with a reliable alternative to traditional bank loans and overdrafts, which are often challenging to access, especially in the SME sector.

Factoring adds more value than business finance alone

Another advantage of choosing this type of working capital solution, is that factoring companies also provide a comprehensive and professional debtor administration service. The factoring company acts as a credit controller on the business’s behalf and it also administers the sales ledger for its clients.

An experienced factoring company is able to provide the following services:

  • Conducting credit checks
  • Phoning debtors for payments due
  • Sending reminders and final demands
  • Handling receipting and reconciliations
  • Assisting clients to liaise with attorneys if it becomes necessary to institute legal action

This professional support allows a business to focus its resources elsewhere. This could represent a significant time and cost saving for an SME.

Why partner with Merchant Factors?

Merchant Factors has been providing factoring solutions to businesses in South Africa and beyond for 30 years. The firm specialises in providing organisations with an innovative and flexible alternative to bank finance, while supporting them with expert credit control and debtor administration services.

Merchant Factors’ independence, experience and flat organisational structure means that, unlike many larger financial services institutions, its facilities can be tailored to suit most companies’ unique needs.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can also offer businesses the shortest turnaround time in the industry from application to pay-out.

For fast, flexible business finance – contact Merchant Factors today

Finance beyond the Numbers.