2019: Factoring – a good year, but with a negative outlook on 2020 due to Corona
2019 was another good year for the German factoring market: The factoring turnover grew by around 12% in the first six months, while at the end of the year, the increase reached nearly 14%. A remarkable result, given that the German GDP in 2019 increased by „only“ 0,6%. The whole factoring market – measured through the turnover of the members of the German factoring association (Deutscher Factoring-Verband e.V. – DFV) – grew strongly to 275.6 billion Euro, a very good outcome.
“In consequence, the factoring ratio, which measures the relation between the volume of purchased receivables of the German factoring companies and the total GDP, crossed the 8%-mark for the first time ever – a new all-time high in the use of factoring”, Helmut Karrer, member of the German factoring association’s executive board, comments on this impressive development.
The (new) acquisition of customers also took a dynamic turn in 2019, even though it has to be taken into consideration that the association welcomed new members with a large number of clients. Factoring is now used as a modern form of financing by 90.300 clients, a surge of 106% (2018: 43.800) and therefore a new all-time high. The association’s members purchased receivables to be paid by 8.2 million debtors.
A close-up of the factoring market
While the national factoring business increased by 23.4% to 204.6 billion Euro, 2019 ended up being the first downturn year for international factoring since the last financial crisis a decade ago – nota bene in times well before Corona. The turnover in international factoring went down by 6.6% to 71 billion Euro. This is mainly due to export factoring decreasing by 7.7% (from 71.7 billion Euro in 2018 to 66.2 billion Euro in 2019). This decline could not be compensated by the remarkable growth of 11.3% in import factoring (4.8 billion Euro in 2019 in comparison to 4.3 billion Euro in 2018). Fittingly, the average collection period in international factoring worsened by 3.2 days to 51.1 days, meaning that foreign debtors paid increasingly late already in 2019.
The top 5 of the most important industries for factoring are dominated by trade/trade negotiation, the health sector, services, manufacturing of metal products and machines and vehicle construction. The rise of the health sector by seven marks to position no. 2 is in part also due to new members joining the DFV.
Among the different forms of factoring, Full-Service Factoring has gained further momentum in 2019: Even though Inhouse-Factoring still dominates by covering 66.4% of the total factoring turnover, Full-Service Factoring turnover has increased considerably to now 25% (plus 7.4% in comparison to 2018). The expansion of factoring business with SMEs which largely entails the use of Full-Service contracts may well be an explanation for this development. In 2019, Maturity Factoring also gained a higher percentage of now 8.6%.
The increase of factoring business in SMEs with smaller receivable turnovers has continued in 2019: In terms of the number of factoring clients, by now 93.5% of the clients are in the SME-typical turnover segment of up to 10 million Euro. When analysing the segment sizes in relation to the turnover, the big-ticket turnovers of more than 50 million Euro dominate with a share of more than 55%, in contrast to 19.5% for SME-typical turnovers of between 10 and 50 million Euro. Therefore, factoring continues being a suitable means of financing for both small and large enterprises.
As a pandemic-driven economic recession in Germany in 2020 seems unavoidable, the Coronavirus-pandemic will mark a break for both the factoring industry and its association, which represents around 98% of the factoring market organized in associations in Germany, measured by the factoring turnover, and hence is the leading benchmark of the whole German factoring market. The DFV’s members paint an unprecedented gloomy picture when it comes to the future: 40% of members only see a “fair” development in 2020, around 13% foresee even a “poor” or “unsatisfactory” progress. Only 20% foresee “satisfactory” and around 27% expect “good” or better developments for factoring in 2020. In contrast to the results of the same survey in January 2020, the worst marks “fair”, “poor” and “unsatisfactory” increased by nearly 53% in the currently updated survey – this is unparalleled among the association’s survey results so far.
Statistical data from after the last financial crisis may however lend some comfort: Years of crisis apparently tend to be good years for factoring, and many of the factoring clients which first used factoring in and around the financial crisis of 2008/2009 subsequently remained true to this alternative form of financing during the following and economically more prosperous years –the development in client numbers over the last years bear witness to this. With any luck, and in a market with likely increased demand, there will be a chance for stable providers to gain more market shares in comparison to rather traditional forms of financing once the pandemic is over.
You can find more detailed information in our current Annual Report for 2019: www.factoring.de
Deutscher Factoring-Verband e.V.
Dr. jur. Alexander M. Moseschus, Verbandsgeschäftsführer/managing director
Behrenstr. 73, 10117 Berlin
Tel.: +49-(0)30-20 654 654, Fax: +49-(0)30-20 654 656