More expensive credits to lead to expanded factoring services

More expensive credits and companies limited access to banking loans on the backdrop of the international financial crisis will lead to a 30% advance of the factoring market in Romania in the years to come, say specialists. Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) at a discount

The three parties directly involved are: the seller, debtor, and the factor. The seller is owed money (usually for work performed or goods sold) by the second party, the debtor. The seller then sells one or more of its invoices at a discount to the third party, the specialized financial organization, to obtain cash.

“I think that in current economic conditions small and medium-sized enterprises (SMEs) survival depends upon the extent to which they succeed to finance growth opportunities. Given that access to bank loans is increasingly difficult and more expensive, financing through factoring contributes to the improvement of cash flows, without pushing upward the indebtedness degree of the companies.
As well, the company has access to liquidities without the need to come up with collateral”, Bogdan Rosu, manager of Next Capital Co. is quoted as saying by Ziarul financiar daily.

The local market of factoring, with a financing volume in the value of 1.3 billion euros last year, according to the International Factors Group statistics, is controlled in a proportion of almost 73% by companies part of banking groups. The main players are BCR, BRD, Raiffeisen or UniCredit Tiriac operating on the factoring market through “in house” factoring departments, whereas loan institutions, as ING and Transilvania Bank, are present on the market through specialized divisions, respectively Commercial Finance and Factoring Company.

Next Capital Co., with financing in the value of 5 million euros last year, is one of the main independent players on the market. Recently, the British private equity fund North Bridge took over 29% of the company capital, the value of this transaction attaining 4 million euros. The majority of Next Capital clients are SMEs and enterprises.

http://www.financiarul.ro/2008/11/07/more-expensive-credits

Business Financial Services

More expensive credits to lead to expanded factoring services