Sailing through the storm with Factoring

Transcription

1 By: Panos Papatheodorou - Executive Committee Member, FCI - Vice-Chairman & CEO, MARFIN Factors & Forfaiters Sailing through the storm with Factoring 1

2 Crisis and Factoring Today we are all witnessing a deepening financial turmoil which leads to: escalation of sovereign debt crisis high market uncertainty diminished appetite to extend credit Despite that: Factoring remains a reliable commercial and financial tool within the Greek (and not only) business community, driven by: The increase in the country s exports (31% in the first quarter of 2011) The increasing need for credit risk protection Its dynamic product mix required by various suppliers The Two-Factors export factoring transactions that ease the development of export sales on open account terms. Based on FCI s statistics, Greece in terms of 2-Factors export volumes realized in H an increase of 49.65%, (5th largest in the world). 2

3 Impact of economy slowdown in Greece Majority of domestic demand indicators in Greece remains negative. Retail sales volumes fell by 10.6% y-o-y February Consumer confidence in H deteriorated further. All constituent indices (manufacturing, construction and retail) remain negative. Industrial sectors experienced further drops in production output ranging between 5-25%. Distortion is observed on the local production side as: Production was oriented towards domestic consumption not export markets. Exports included products and services with relatively lower or medium quality, in comparison with international competition. Exports, representing an 18.5% of the GDP, started to grow in early 2010, as the Greek producers sought to substitute income loss from the domestic markets. 3

4 Factoring Experience In 2010, Greek factoring market continued to grow (19.63% -EUR 14.7 bln from 12.3 bln), despite the GDP slowdown. Domestic factoring increased by 17.10% (from EUR 11.5 EUR 13.4 bln) International factoring recorded a note-worthy increase of 56.3% (from 800 bln to bln), largely driven by Export Factoring. Import factoring grew by 33.62%, however outlook for 2011 is negative. By selecting reliable and factorable receivables, and by assessing effectively the viability of the trade transactions, Factors prove to be a helping hand for the various supply-chain players. By being an active part of the supply chain, Factors contribute to a more efficient management of trade receivables and bolster their own resilience in the face of the credit crisis. 4

5 Factoring Experience (.cont d) SME s and large corporations facing problems due to shortage of liquidity, turn to Factoring, as a contemporary alternative for effective cash flow management. Factors facilitate trade flows by implementing products such as reverse factoring and back-to-back factoring. Via Factoring trade companies and producers: outlast the downturn, secure themselves against risk, or minimize their loses enjoy prompt collection services and administration. Factoring volumes as a percentage of GDP in Greece, increased from 5.2% (2009) to 6.7% (2010) Challenges and Opportunities for Factoring: Credit insurers have less appetite and capacity to cover credit risk. Transacting parties receive less credit from traditional lenders. Trade credit periods in the domestic market have been extended. Export factoring assists clients in the development of export markets. 5

6 Challenges for Greek Factors Risk-taking. Import and domestic Factoring becomes more risky, since credit insurers have become more reluctant to insure Greek risks. Funding became scarce and more expensive due to the country s current financial position Use of post-dated cheques as a payment mean and security. Numerous of fraudulent cases especially in Invoice Discounting covered by post-dated cheques has been reported. Trade credit periods in a number of sectors have been extended to such a degree that receivables cannot be factored. 6

7 What a Factor must and must not do! Factors must: focus on high-end service, work strictly using the Factoring criteria (profitable clients with sound business record, well-notified buyers, wide-spread of receivables, proper company structure, etc.), develop factoring solutions that allow effective management and collection of domestic and international sales, adopt up-to-date IT systems. Factors must avoid: invoices that do not reflect a True trade confidential factoring transactions receivables from State-owned companies, that can not be confirmed and managed effectively. receivables that are directly/indirectly related to severely affected by crisis sectors (e.g. construction). 13/9/2011 7

8 What we must bear in mind! Things refuse to be mismanaged long and that: We cannot change the weather, we can only adjust our sails Thank you for your attention! Panos Papatheodorou 8