Factoring in Romania has reached EUR 5 billion

On an upward trend for the fourth consecutive year, the factoring market grew by 11% in 2018 compared to the previous year and, thus, exceeded EUR 5 billion. The data result from the annual study on market developments conducted by the Romanian Factoring Association (ARF). Companies with a turnover exceeding EUR 50 million account for the largest share (40%) of factoring volumes, while companies with turnovers between EUR 5 million and EUR 50 million account for 38%. 22% of those volumes are covered by companies with a turnover of up to EUR 5 million, generally regarded as SMEs.

In recent years, the market has experienced steady growth between 10 and 13 percent, both in relation to «traditional» factoring and to the types of factoring recently widely introduced, which have been well received by the companies in Romania. They include, for example, reverse factoring, which has been on the market for approximately ten years, but has strongly developed over the past three or four years and which, in 2018, reached almost EUR 1.3 billion, namely 32% of total domestic factoring. This product has a particular characteristic, namely that the beneficiary of services and products proposes this type of factoring directly to its suppliers, together with the financing institution”, explains Bogdan Roșu, President of ARF.

In 2018, domestic factoring grew by almost 13% compared to the previous year to approximately EUR 4 billion. As regards business transactions on the domestic market, there are two main product categories, i.e., recourse factoring and non-recourse factoring. Collection services may be also contracted independently by the financing and default risk hedging components with a view to introducing and maintaining payment discipline in relation to the client portfolio of a company. Thus, as regards domestic trade, non-recourse factoring grew by almost 20% compared to 2017, in line with the trend of the recent years. The main feature that makes this type of factoring attractive continues to be the assigned debtor’s default risk hedging component.

As far as the main industries are concerned, the FMCG sector uses factoring to the highest extent, last year reaching a volume of EUR 834 million. IT&C is the second most important user of factoring, with EUR 671 million debts managed through factoring, which means an increase by 8.5% compared to 2017. Third place in terms of volume is occupied by the sector generically referred to as “Metals, chemicals, water, recycling”, with over EUR 529 million, which has also seen the highest growth as percentage, by approximately 48%, compared to 2017. This sector is also ranked first for export factoring transactions.

Under the current circumstances, ARF also informs the economic environment that “the current situation and macro-perspectives require companies to conduct a thorough analysis of their portfolios of clients and suppliers in order to implement concrete solutions aiming at ensuring the balance of working capital, but mostly with a view to avoiding any activity blockages as a result of the suppliers’ impossibility to deliver on time or delays in payment or even losses from certain business relations”, states Bogdan Roșu.

The current economic environment does not seem to be very favorable to the private sector in the short run for large companies and SMEs alike. Concrete measures related to the access to new European funds and increase of investments, which would rapidly result in new jobs and implicitly in higher tax revenues to the budget, would be more than welcome. Various scenarios of economic downturn in the Euro zone are considered at international level, which will be felt in Romania as well. For this reason, Romanian companies, most of which have capital-related issues, will be extremely vulnerable to a decrease in sales and an increase in uncollected receivables. Over the next period, it is essential that companies should be able to anticipate these types of developments by means of a thorough analysis and prudent management of the client portfolio, conducted either by an internal team or by an outsourcer, such as a Factor (Bank/Non-financial banking institution), so that any market contraction (and all resulting effects) will not have a significant impact on their activities and the supplier-beneficiary relation”, adds Bogdan Roșu.

The information related to the assessment of the 2018 factoring market was supplied by the members of ARF – Access Financial Services IFN, Banca Comercială Română S.A., BRD – Groupe Societe Generale S.A., Banca Transilvania S.A., CEC Bank, EximBank, IFN Next Capital Finance S.A., ING Bank Romania S.A., Libra Bank, Patria Bank, First Bank S.A., Raiffeisen Bank S.A., Unicredit Bank S.A. It also includes data offered by non-members and an estimate for the other players which could not take part in the study.