Finance Factoring

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.

The COVID-19 pandemic is a global health crisis without precedent in living memory. It has triggered the most severe economic recession in nearly a century and is causing enormous damage to people’s health, jobs and well-being.The Outlook focuses on two equally probable scenarios – one in which a second wave of infections, with renewed lock-downs, hits before the end of 2020, and one in which another major outbreak is avoided. the UK GDP could fall be between 11-14% compared to the previous year- source http://www.oecd.org/economic-outlook/june-2020/

Factoring plays a very important and highly regarded role in funding companies of all sizes in the EU.

• The lion’s share of factoring clients are SMEs.
• The key industry sectors that factors provide capital to are
• manufacturing, distribution and service firms.
• Factoring has achieved significant penetration rates relative to GDP in almost every single EU member, especially France, Italy, the UK and Spain

Factoring is an aggressive way to release cash through your receivables, it is expensive but for some this may be the difference between surviving or not.

Example of Invoice Factoring benefits

• Boost your cashflow without having to wait up to 120 days for your customers to pay you
• Our revolutionary digital onboarding gives you quicker access to funds and allows us to take on new business remotely during this lockdown period
• Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled
• No need to chase your invoices, we can do it for you
• 6 month trial period followed by a rolling contract

source https://www.hitachicapital.co.uk/business-finance/invoice-finance/

Public sector buyers are governed by prompt payment codes and suppliers can work with their customers to calculate appropriate discount based on a defined payment schedule through discounting.

Read more about how Coronavirus will affect the payment industry https://www.mckinsey.com/industries/financial-services/our-insights/how-payments-can-adjust-to-the-coronavirus-pandemic-and-help-the-world-adapt#

The sudden disruption to the economy can only be described as a black swan event