Will factoring companies continue to provide financing ?
Will factoring companies continue to set up new financing ?
For example, they are currently studying the measures needed to overcome possible barriers related to the confinement (e.g. videoconference auditing, electronic signature, etc.).
The banks have a massive role to play in financing the huge “air hole” linked to the blockage and delay in activity. Factoring companies have and will have an important role to play in anticipating and financing the resumption of activity after the confinement.
What are the consequences of the COVID-19 crisis on financing such as factoring ?
If we look back at the 2008/2009 financial crisis that we experienced with our corporate clients and Factors partners, there was no disruption in Factors’ financing. Over a short period of time (1 year), most Factors had slightly increased their financing conditions, due in particular to the increase in their refinancing costs and the regulatory requirements for return on equity capital in a period of heightened risk. However, none of our clients lost their Factor financing.
Companies that anticipate a cash requirement at the end of this confinement must start preparing for it now. In fact, we believe that it is necessary to :
- for non-factored companies, study the implementation of a factoring contract in order to prepare for the strong cash-flow needs at the end of the confinement period,
- for companies that are currently factored, study contractual arrangements to increase financing and study the extension of the programme to non-factored areas (export, subsidiaries, etc.),