Most often, the promotion of factoring solutions is done with SMEs in mind. Businesses at the beginning of their journey or without their own financial resources need easy access to funds for development. Factoring opens up financing opportunities without material guarantees and at advantageous costs. Under the pressure of increasingly long terms in which they manage to recover their receivables, more and more SMEs turn to the factoring solution.
The data relating to the Romanian market show that large firms with turnover exceeding 50 million euros dominate the ranking. What are the reasons why a company with a strong business, high turnover, and majority market shares in its segments uses factoring instead of bank credit? Their access to bank financing lines is much easier than that of an SME in terms of conditions, yet the rather cumbersome process can affect the company’s liquidity at certain times.
Factoringul, soluția prin care companiile mari își asigură lichiditatea
Business culture – In Romania, factoring does not have a tradition comparable to that in Western economies. In Western countries, non-bank business financing solutions have been used for decades. The criteria by which firms choose between financing options are pragmatic and do not take into account the popularity of traditional products, as long as they are not competitive in terms of accessibility and costs. Long captive in a market where banking products had no serious competition, Romanian firms are still discovering viable alternatives.
Vulnerable industries – In a dynamic economy, certain sectors are more vulnerable than others and require quick solutions to secure cash flow and resources for development. The manufacturing industry, construction, IT, the pharmaceutical industry, certain companies in the energy sector, and recruitment firms are economic sectors that traditionally constantly seek solutions to continue operating without major disruptions. Some have seasonal business patterns; others constantly require positive cash flow because they have high production costs, and in certain activities recovering payments from clients is a cumbersome process.
Limitations in the relationship with banking institutions – The conservatism of banks proves, over time, to be a far too high price for companies, regardless of their size. Bank credit lines can, in certain situations, prove insufficient to cover financing needs, and an increase is not always possible due to regulations specific to the banking industry. In the case of factoring, these limitations do not exist. Any situation that affects a company’s bankability can lead to the suspension of its bank credit lines, this criterion not being one that would prevent application for a factoring solution. Bank support can also be withdrawn during economic crises, leaving companies exposed to the risk of business closure.
These are just a few of the reasons why any company, regardless of size, can turn to factoring, before other financing solutions or in parallel with them. Factoring is increasingly being talked about in Romania, and many companies have taken action.
