Factoring market in germanyPresentation Transcript
FACTORING MARKET IN
Factoring is a financial transaction in which a business
sells its accounts receivable i.e. invoices to a third party,
called a factor, at a discount.
The sale of the receivables essentially transfers
ownership of the receivables to the factor, indicating the
factor obtains all of the rights associated with the
When factoring a company sells its receivables from
deliveries of goods and services to its customers
continuously to a factoring institution.
In this way, the company gets immediate liquidity directly
from his debts. The Factor checks before signing the
contract and the ongoing creditworthiness of the
customer and takes under an agreed limit, the full risk of
With immediate liquidity obtained by factoring a
factoring company may also procure-use income in
purchasing because discounts and special rates can be
used. The factoring institutions secured failure protection
(so-called Delkredereabsicherung) and regularly
updated information about the creditworthiness of each
customer (the debtor) ensure secure distribution
channels for factoring user enterprise.
The outsourcing of claims management provides
administrative relief, especially in SMEs. The sale of
receivables reduces the balance and leads to better
balance sheet ratios, an increasingly important
argument against banks in times of "Basel II."
It is not surprising that factoring is already more
than 30 industries daily used form of business
financing. Among the most important factor
customers currently include trade and commission
trade, metal processing, food, beverage,
manufacturing of machined products, engineering,
manufacturing, production of chemical products,
transport equipment, electronics / electronic
devices and paper, publishing and printing .
Especially the wide range of the middle class still
has considerable potential to use factoring as an
alternative and attractive form of business
THE FACTORING MARKET
The German factoring market shows stable growth
due to a positive business climate, a rising
acceptance of factoring and a still high market
potential, penetration rate in Germany of 3.1% of
GDP is still below European average.
The German Factoring Association is Deutscher
Factoring-Verband e.V. (DFV) with more that 25
players who are a part of the association.
The factoring market in Germany is not only varied
due to its diversified client and debitor industries,
but also due to the different forms of factoring which
are on offer.
Mostly, these are adapted to the individual needs
and wishes of the clients, such as the amount to be
financed, the maturity and collection period, the risk
mitigation, the transfer of the debt management and
other services offered by the factoring company.
Inhouse Factoring: With this form of factoring, the debt
management remains with the factoring client who acts
as escrow for the factoring company. The factoring
company assumes the financing and full risk cover (for
the delcredere/default case). Hence, this form of
factoring is suitable for those clients who dispose of a
reliable debt management of their own.
Standard- or Full Service-Factoring: This form of
factoring includes the factoring company financing
according to turnover as well as assuming the full risk
cover (for the delcredere/default case) and the debt
Maturity Factoring: In the case of this form of factoring,
the factoring client takes advantage of the full risk cover
and debt management services without receiving
immediate cash payment for the sold receivables.
Maturity factoring makes financial planning easier for the
factoring client as certain payment dates can be agreed
upon with the factoring company. This planning reliability
forms the integral part of the financing effect of this form
Intragroup turnovers, turnovers from receivables which
have not been bought and the refinancing of other
factoring companies are comprised in the category
"other forms of factoring".
In 2009 Germany experienced the sharpest drop of
its GDP since the 1930s, a decrease of 5%
compared with the previous year.
Being heavily dependent on exports, which account
for one third of its GDP, Germany was initially
affected more severely than other nations by the
global economic downturn. This was due not only to
the sharp decline in world trade, but also because it
specialises in sectors that were among the worst
hit, such as auto manufacturing, machinery and
But now, with signs that those sectors and global trade
are gradually returning to normal, Germany may benefit
more than other economies. Most countries have moved
out of recession, trade is growing sharply and
companies are investing once again. As a result, foreign
orders for products made in Germany have leapt.
German industrial orders are increasingly expanding
and are now significantly higher than last year.
At the same time companies are starting to stock up
their warehouses with the semi-finished and finished
products they had run down during the last year. As
worldwide demand recovers, these inventories will grow
again, helping to revive economic activity.
In addition, companies will be more cautious about
investing than they were in previous recovery
phases, because the banking sector is still beset by
problems and has not yet given up its restrictive
Hence, it will remain difficult for companies to
acquire fresh credit. Many of them have been so
hard hit by the slump in sales revenues in 2009 that
they lack the cash to finance their investments
themselves and need to look for alternative funding
sources. So the economy remains vulnerable, due
amongst other things to a lack of funding supply
from the banking sector.
At the end of December 2008, the Annual Tax Act
2009 was passed. It contained amendments to a
number of laws including the German Banking Act.
As a result of these changes, factoring companies
are now under the supervision of the German
Federal Financial Supervisory Authority (BaFin).
This change in regulatory law is intrinsically linked
to a change in German business tax law which now
grants factoring companies a business tax privilege
similar to that already granted to banks.
The introduction of the regulatory requirements for
factoring companies imposes several restrictions
and demands which are completely new to most
The new regulatory requirements may lead to a
certain level of consolidation in the factoring
MARKET PERFORMANCE AND SUPPLY
Currently 25 factoring companies are members of
the German Factoring Association (DFV)
representing more than 90% of the market.
The DFV no longer publishes the market shares of
individual factoring companies. The estimated
market share of the top three factoring providers
amounts to around 60%, and the top ten to around
91%. Growth rates amongst the top ten factoring
companies vary between +39% and -43%.
The decrease of factoring turnover reflected the
downturn of German economy last year and the
slumped turnovers of existing clients.
But the negative impact of the economic crisis on
existing factoring business was partially absorbed
by the rising demand for factoring generating new
Within only one year, the number of customers
grew remarkably from about 5,450 in 2008 to 8,840
in 2009, an increase of 62%, as reported by the
The reason behind this development is the fact that
more and more medium sized enterprises without
access to the capital market are supplementing or
substituting the restrictive bank credit supply by
other funding sources, such as factoring. And they
see the funding of their receivables as a very
flexible finance alternative, especially in today’s
unstable economic situation.
Despite the decrease in factoring turnover, the
factoring-ratio (the ratio between the total volume of
receivables bought by factoring companies and the
GDP) rose by 0.4% to 4.0% confirming the positive
trend of increasing market penetration - even during
Clients from more than 30 industries are using factoring.
According to the DFV, the key industries in 2009 were
trade, food and nutrition, metal products manufacture,
machine construction, electronics and electronic
components, services, chemical product manufacturing,
metal production and processing, paper, publishing and
printing, other manufacturing industries and the health
Industries that are dependent on export trade were
particularly affected by the economic crisis and suffered
the highest declines in factoring turnover, e.g. metal
production and processing and the automotive industry.
THE YEAR 2012
2012 turned out as another successful year for the
German factoring industry.
From the factoring clients’ point of view, factoring is
still very much in demand. This is illustrated by the
number of factoring clients, which rose to
approximately 17,100, a new maximum and notable
increase by 17.12% in comparison to 2011.
Factoring has therefore established and embedded
itself as an instrument to finance means of
production and to collateralise and safeguard
against risks, especially in the SME sector.
The factoring ratio (referring to the ratio between
the total of outstanding balances bought by the
factoring companies associated in the German
Factoring Association and the GDP) dropped just
below the magical 6%-hurdle (5.95%).
Despite this slight decrease, the turnover of the
factoring companies associated in the German
Factoring Association once more corresponds to
approximately 6% of the total German GDP. This
figure clearly illustrates the relevance which
factoring by now holds in the German economy.
The top 5 of the most important key industries in
factoring remained unchanged: Trade and trade
negotiation, services, manufacturing of metal
objects and machine construction, the food/nutrition
industry and metal production and processing are
still dominant. Remarkable losses were noted in the
textile and clothing industry as well as in the
production of furniture, jewelry, etc. (down by three
degrees, respectively), whereas the transport and
telecommunications sector went up four degrees
The DFV reported that due to the continuing
increase in business from new customers, more
than 43% of its members expect good or very good
business development during the first six months of
With regards to the future development, the
members of the German Factoring Association
have a nearly unchanged optimistic view of the year
2013: Just under 67% of the members expect at
least a “good” development, 33% predict an at least
“satisfactory“ development of the business.
Despite this positive prognosis, 2013 might once
again be a rather challenging year for the German
factoring industry for several reasons.
In the aftermath of the recession, the unstable
economic situation typically bears the risks of
liquidity deficits and increasing insolvencies among
financially stricken companies.
Hence, factoring companies cannot yet relax their
risk management and monitoring efforts. Some
factoring companies without a strong capital base
may also continue to face refinancing problems and
suffer declining margins. New factoring business
may still struggle to make up for the eroded
turnovers of their existing client portfolios.