2. On a worldwide scale, almost a thousand
companies currently offer factoring services, of
which 435 are in Europe.
The factors, namely the companies operating in
this market, are usually subsidiaries of banking
groups, financial institutions, insurance
companies or manufacturing firms, and rarely
independent companies.
France has the second largest factoring market in
the world behind the UK. The five biggest
Markets in 2010 were respectively UK & Ireland
(17.0%), France (11.4%), Italy (10.7%), Germany
(8.8%) and Japan (7.3%). It represents 15 percent
of the total market in Europe, and 10 percent
globally.
France 7.6% ; increase in demand in 2013
Volume of cross-border business grew in 2012:
France, was second with a 33% growth to EUR 2.7
billion
3. France’s total volume is higher than for the
Americas
The Factoring Market is relatively
concentrated with the five biggest Factoring
Companies in France totaling on 87% of the
National Market. With 38% of top 5 companies
being Bank subsidiaries and 35% being Bank
Divisions, it is clear that Factoring has
become highly dominated by Banks.
The leading factor in France has à 20%
market share
4. Factoring is a solution for managing companies’ trade
receivables.
It provides them with financing which can
complement or take the place of conventional bank
facilities.
Factoring is aimed at all companies trading with other
companies or public-sector bodies, whatever their
size and sector of activity, whether or not they are
engaged in exports.
The growing need for competitiveness increasingly
emphasizes the advantages of outsourcing the
management of trade receivables, allowing better
concentration on core business, raising the quality of
services offered to customers and fulfilling
commercial objectives more effectively.
At the same time, the company’s efficiency increases
and management and production costs are reduced or
stabilized.
The factor enables receivables to be turned into cash
as they fall due and costs to be kept under control.
5. Factoring is a durable solution for the
provision of short term
finance, incorporating risk
prevention, rapid financing of
receivables, monitoring, follow-up and
account management. By outsourcing the
management of trade receivables, the
company gains three key strengths:
conversion of fixed costs into variable costs;
optimised administration;
secure financial management.
Trade receivables represent on average 40%
of a company’s assets.
6. A company can benefit from the use of
factoring at each stage in its development.
In the start-up phase, financing receivables
through a factor may overcome a shortfall of
cash flow or bank facilities.
In the maturity and revenue-growth phase,
there are various reasons for using the
services of a factor: protection against
customer failures, relief from
administrative tasks or financing of growth.
7. Non-disclosed factoring with delegated
management, known as “Confidential
factoring". The company retains full
control of the management of its
receivables, and the existence of the
factoring contract is not disclosed to
customers.
8. Reverse factoring
The company (the principal) gives advance
instructions to the factor to pay its suppliers
when their invoices have been passed for
payment.
It reimburses the factor on the normal due
dates of the invoices.
9. Export factoring enables the company to
delegate the management of export
receivables.
The factor either has local companies or
correspondents, or multilingual
personnel, who are fully conversant with the
specific characteristics of international
trade.
The company’s export receivables are
guaranteed against the risk of bad debts on
the part of a customer.
10. The factor’s services are remunerated through
two main components, which are defined in the
contract with the company:
The factoring (or service) commission provides
remuneration for the management operations
The financing commission, based on a bank
reference rate, is calculated in accordance with
the amount and period of financing requested.
Factoring essentially includes the service
commission, which pays for the management
operations, and the financing commission, which
pays for the cash advance.
11. After the contract has been signed, the company forwards
duplicates of its invoices to the factor on a regular
basis, for example every week. This can be carried out
electronically or by post.
Except in the case of “confidential” factoring, a
subrogation notice supplied by the factor must appear on
the company’s invoices, and its customers are informed
that they must send their payment to the factor.
For each new customer, the company opens a purchaser
account with the factor and requests a limit up to which
the commercial transactions in respect of that customer
will be guaranteed.
Most factors offer online services enabling the company
to monitor all its operations: guarantees
provided, payments received or disputes detected by the
factor, financeable amount provided etc.
Finally, the company has a dedicated contact for all its
factoring operations.
12. To take advantage of factoring, the company
includes a subrogation notice on its invoices
and forwards copies of invoices to the factor.
By means of online services it can then
request financing and monitor its customers’
payment status.
13. The latest strategy is focused on the SME sector,
Nevertheless, they still compete for large
corporate deals, with international tailor-made
solutions.
The main change in product mix is concerned
with an increase in full factoring contracts
signed with SMEs. Larger companies seem to
have significantly reduced their inventories in
2009 and will not need extra funding before
their activities rise again.
Regarding the portfolio, invoice discounting
represents more than 50% of the turnover and
this percentage will grow further in response to
demand.
14. Banks have introduced reverse factoring in
the French product mix. This facility is still
quite new in the French market and the main
competitors only have a few clients using this
product. In 2011, it represented 1% of the
market turnover.
It is expected to grow within the next five
years to reach an average of 5% of the
volume.
15. CGA and Air France signed a factoring deal on
the 12th of December, 2012.
CGA, Societe Generale’s French factoring
subsidiary, has finalised in December a deal
to provide factoring services to Air France.
Through close dialogue and cooperation, CGA
was able to tailor their services to suit Air
France’s needs, offering non-recourse
factoring up to an agreed amount of EUR
250m.
18. Despite the generally low levels of economic
growth currently evident across the EU, the
Industry continued its strong growth pattern
in 2012 to a record €1.2 Trillion. This growth
reinforces the importance of the funding
solutions for the support of SMEs, economic
activity, wider growth and wealth creation.
