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• 11 Aug

  Is Factoring Growing In Popularity

  We regularly have meetings with factoring companies to keep up to date with the latest pricing offers and product developments.

  In a meeting the other day, with one of the small independent factors the Sales Director told us that they were experiencing an increase in the number of factoring enquiries, over and above the demand for invoice discounting. He suggested that they were seeing factoring of receivables growing in popularity, due to the service provided with the product e.g. credit control is provided by the factor, in addition to just the funding which you receive from an invoice discounter.

  Is Factoring Growing In Popularity?

  Any single independent factor may well see swings in the makeup of the new business product requirements that they are receiving, creating a perception that factoring is growing in popularity. I wanted to check if that reflects the figures across the invoice finance industry. Consulting the latest UK Finance statistics (formerly the ABFA statistics - bear in mind that not all providers are members so there are some additional clients that fall outside of these numbers) to the end of Q1 2018 showed the following:

  • UK factoring volumes (value of invoices factored with members of UK Finance) were £4.713m. That figure was 0.1% higher than the equivalent figure for the previous year. During the same period, the UK invoice discounting volumes decreased by -2.1%.
    
    
  • Total UK factoring client numbers were 15,208, which is just 1 client higher (discounting clients were 24 lower) than the previous quarter, but down by 597 from the same time the year before.

  So the figures suggest that there has been a very slight uptick in the factoring receivables against invoice discounting recently, but that factoring numbers are down on this time a year ago. One also has to remember that some clients will be lost and terminated over time, and so they have to be replaced just to keep numbers, and volumes, static. Assuming a 5 year client life, that would mean needing to write over 5,000 factoring deals, each year, in order to keep client numbers static overall. This could magnify the perception that factoring is becoming more popular than invoice discounting.

  The statistics do show a slight, recent shift towards receivables factoring, however, the swing is not likely to be perceptible to small factors and over the last year, the opposite trend is the case overall. The shifts are slight so they are unlikely to be driving the perceptions of very small providers with portfolios of just a few hundred clients.

  By Glenn Blackman