For the last seven years the International Factors Group has issued a report commenting on the state of the Factoring industry. The 2014 report shows it is indeed healthy.
Information is gathered from sixty countries via a survey of providers around the globe which provides a comprehensive view of the industry in total.
Key points from the report show—
- The global factoring industry volume in 2013 increased by around 3% to reach a record level of $AUD3.21trn.
- Nearly $AUD496bn is being advanced to meet the working capital needs of around 530,000 businesses, ranging from near start up SMEs to global multinational corporates.
- The largest traditional market remains the UK and Ireland but the asset- based lending approach in China is estimated to have grown to approaching $551bn.
- Europe remains the largest zone with 60% of business, whilst Asia is now approaching 30% of volume.
- Respondents report increasing awareness with 15% seeing it as high and 62% as medium level
- Three quarters of respondents are confident of increasing demand.
- The large majority (75%) see the development outlook for the industry as positive.
The figures certainly indicate a stable industry in a good position to assist those businesses needing regular capital which is not readily available from the more traditional source such as a bank.
An Australian survey conducted by The Financial Executives Research Foundation in 2014 found the priorities in 2015 for the majority of finance managers or chief financial officers revolved around cash flow and improving their working capital capabilities. The survey revealed due to worldwide volatility, finance executives believe they need to keep a close eye on their bottom lines and be able to track their cash flow in more depth.
The Managing Director of Protiviti’s Business Performance Improvement practice, Peter Firestone who worked with the Research Foundation, “businesses will need to work out the benefits of working alongside financial providers offering services such as debtor finance.” This endorses the value and flexibility of Factoring to ensure working capital and managing the bottom line.
In Australia Factoring only became known in the 1970s and then it was considered a last resort option, mainly due to ignorance, as it is an industry with a very long history in the UK and the USA. Since then Factoring has increased and over the last decade has seen a 400% growth.
An analysis done by the Reserve Bank of Australia shows nine out of every ten businesses in Australia engaged in innovative strategies are SMEs and studies from the NSW Business Chamber found that around 30 per cent of SMEs have “missed an opportunity” because they lack enough credit to put their plans into practice.
CEO of The Chamber Stephen Cartwright, highlighted some other startling statistics from its ‘Small Business Access to Finance’ report.
“Our research has identified of SMEs rejected for a loan, around 55 per cent felt the rejection significantly constrained firm growth; around 21 per cent felt it significantly increased the chances of bankruptcy; and 18 per cent had to lay off staff.”
Debtor finance is definitely not and should never be lending of last resort, nor is it a loan. It is an efficient way for businesses to manage their cash flow and plan for growth.