The Romanian Factoring Association (ARF) carried out the half-yearly survey of the factoring market in Romania, which reveals a very slight growth, of approximately 1%, as compared to the same period of last year, the total accounts receivables managed through such structures exceeding Eur 2.25 billion. ARF’s research relies on both the data offered by ARF members (banks and NBFIs), and on the association’s estimations regarding the other market players. “For the first half of the year, there is a stabilization of the factoring marketing, in terms of the overall volume of accounts receivables managed, with a special focus placed on domestic factoring, which did, however, register an important growth due to the higher consumption levels triggered by the pandemic-related fears, mainly Q1. The trend was noticeable in Q2 as well, but with a considerable slowdown”, explains Bogdan Roșu, ARF Chairman.
In terms of domestic factoring, the volumes achieved in the FMCG sector weigh highest out of the total, i.e., approximately 24%, which, in absolute figures equals Eur 431 million. The IT&C sector ranks second, with a 16% weight, the amount of the accounts receivables derived from this sector and managed through factoring reaching approximately Eur 290 million, almost 10% higher as compared to mid-2019. The Motor Vehicle-Machinery-Equipment sector ranks third, with a weight of 12.5%. The sector actually registered the highest overall factoring market growth (21% as compared to mid-2019), reaching Eur 301 million total factored accounts receivable (domestic, export plus import).
While the domestic factoring grew by 11% and reached approximately Eur 1.9 billion in the first half of the year, the total volume of export factored accounts receivable dropped by 28% and import factored accounts receivable dropped by 43%, in the context of the developments of the partner European economies.
The domestic financing via reverse factoring exceeded 40% on the internal market
Reverse factoring/supply chain financing is on a constant growth trend, being very well received by adherents. The figure registered for this product at the level of the market exceeded Eur 744 million during the first 6 months, 35% higher as compared to the first half of last year. Reverse factoring has been present on the market for more than ten years, but it importantly grew mostly over the past five. “This type of financing is proposed to service and product suppliers directly by the beneficiary, alongside the partner factoring provider. The structure agreed upon between the parties allows suppliers to collect their invoices immediately after issue, while the beneficiary (the assigned debtor), the initiator of the reverse factoring process, enjoys cashflow optimization. Both partners benefit from very advantageous costs, due to the beneficiary’s solid financial standing. Concretely, we could take the example of a producer that supplies goods to a large commercial chain (Key Account). The supplier, with the support and upon the initiative of the commercial chain, may opt for the financing of it invoice, and thus immediately receive the money in their bank account, instead of having to wait up to the payment due date laid down in the commercial agreement”, says Bogdan Roșu.
SMEs in the spotlight
With regards to the profile of the companies accessing factoring solutions, companies with turnovers between EUR 5 and 50 million continue to account for the largest share (40%), while companies with turnovers above EUR 50 million account for 36% of the overall market.
“Even if we are still reticent when it comes to the macroeconomic evolution in the second half of the year, we remain optimistic in so far as our sector is concerned, because there was a considerable growth in interest for the factoring sector every year starting Q3. Moreover, the adoption of the IMM Factor program by the Government, which stimulates the access to the recourse factoring, SMEs (which currently only account for a quarter of the domestic factoring volumes) are better informed on the features of the recourse factoring product, and, hence, more willing to turn to such solutions. So, subject to the suitable adjustment of the enforcement rules, regarding which we submitted with FNGCIMM, upon their request, recommendations meant to facilitate the implementation and deployment of the transactions that are part of the program, SMEs will be able to benefit from factoring cost subsidies for the months to follow, as well as from easier access to financing, because the state guarantees half of the financed amount. We hope that the IMM Factor program will be well received and that these companies will turn more towards this type of financing, which helps them adjust their cashflow during these times of economic uncertainty”, further explains Bogdan Roșu.