In restructuring, the advent of the factor is a positive signal for banks.
Restructuring cases have undeniably increased. Repayment of state-guaranteed loans, extension of payment deadlines, tightening of conditions for bank credit: tensions on company treasuries are mounting. An interview of Décideurs Magazine with Gaëtan du Halgouët, Managing Director, and Romain Chaufour, Development Director, of Fibus (formerly Chateaudun Crédit), a factoring and credit insurance consultancy firm.
Décideurs. Could you remind us what factoring is all about?
Gaëtan du Halgouët. Factoring is short-term financing that relies on the customer accounts of B2B companies; it is used by more than 33,000 companies and one in every two medium-sized enterprises in France today. It allows for the conversion of almost all customer accounts into available liquidity. This cash inflow can be utilised for investment, operational expenses, debt repayment... For a manager, it's a very powerful treasury lever because it lends itself to both long-term strategies and emergency situations.
Romain Chaufour. Take, for instance, a B2B company with an annual turnover of 50 million euros. Being paid at 60 days, it perpetually has 8.2 million euros of treasury out, a sum that is de facto not allocated to any other use. By selling its customer claims to a factoring company, this business can recover 80 to 90% of what it is owed in 48 hours rather than in 60 days, that is 6.5 to 7 million euros.
Romain Chaufour. Take, for instance, a B2B company with an annual turnover of 50 million euros. Being paid at 60 days, it perpetually has 8.2 million euros of treasury out, a sum that is de facto not allocated to any other use. By selling its customer claims to a factoring company, this business can recover 80 to 90% of what it is owed in 48 hours rather than in 60 days, that is 6.5 to 7 million euros.
How compatible is factoring with restructuring?
G. H. In the event of financial difficulty, factoring is particularly well suited because it allows for swift action. This speed is twofold. First, with the setup of the contract, and then with the financing provided. Implementing a factoring programme, even with a tender process, can be done in a few weeks. Last summer, we set up financing of 20 million euros in 22 days. A record! Once the contract is signed, invoices are paid 48 hours after their assignment to the factor.
R. C. The question of cash becomes vital when a company is struggling. The size of factoring financing being larger than that obtained through revolving credit facilities, overdrafts, or Dailly assignments, factoring can complement or even replace these schemes. When bank facilities become scarce, factoring offers security and sustainability in financing.
R. C. The question of cash becomes vital when a company is struggling. The size of factoring financing being larger than that obtained through revolving credit facilities, overdrafts, or Dailly assignments, factoring can complement or even replace these schemes. When bank facilities become scarce, factoring offers security and sustainability in financing.
How do banks view factoring in these delicate situations? Is there a change in their approach?
G. H. Nowadays, when a company can no longer repay its debt or state-guaranteed loan, the first question asked by the bank concerns factoring: is there or isn't there a contract in place? The deterioration of a company's financial statements does not prevent the implementation of factoring financing. The latter relies more on the quality of the customer portfolio and the company's activity than on its financial results.
R. C. In restructuring, having a factoring contract creates a climate of trust and fosters conditions for signing an agreement with the banks to reschedule debts. The factor brings liquidity and aids in repaying debt instalments. Increasingly, the factor appears as a "trusted third party" vis-à-vis the banks. Experience shows us that having a proactive attitude, by bringing a factoring solution, can be one of the prerequisites for reaching an agreement with the banks in an amicable procedure.
G. H. Recently, the advisors of a company with a 40 million euro turnover, foreseeing that the company would not be able to meet its debt obligations, asked us to bring firm offers from factors as a precondition for the approval of a conciliation. Thanks to factoring, we often avoid reaching a collective procedure, which is always desirable to quickly get the company back on track.
R. C. In restructuring, having a factoring contract creates a climate of trust and fosters conditions for signing an agreement with the banks to reschedule debts. The factor brings liquidity and aids in repaying debt instalments. Increasingly, the factor appears as a "trusted third party" vis-à-vis the banks. Experience shows us that having a proactive attitude, by bringing a factoring solution, can be one of the prerequisites for reaching an agreement with the banks in an amicable procedure.
G. H. Recently, the advisors of a company with a 40 million euro turnover, foreseeing that the company would not be able to meet its debt obligations, asked us to bring firm offers from factors as a precondition for the approval of a conciliation. Thanks to factoring, we often avoid reaching a collective procedure, which is always desirable to quickly get the company back on track.
But in cases where companies already have factoring programmes in place, is it still possible to improve the situation?
R. C. There are always solutions to be found, negotiation spaces, partners to challenge. This is where our role as a broker comes into play: knowing all the factors in the market, their practices and expectations, allows us to direct tenders with recommendations to get straight to the point and save time.
G. H. Take the example of a case handled last autumn. The factor of a home appliance trading company, whose activity was declining, had become restrictive. Not all factors react the same way to difficulty, so our mission was to quickly find a plan B, both to secure financing and to regain the original level of financing.
R. C. Thanks to our expertise in credit insurance, we even managed to recover a level of guarantees higher than the original programme. Credit insurance is also an important lever for improving financing in this type of situation.
G. H. One should never hesitate to question the credit insurance included in factoring contracts. Depending on the activity and the typology of clients, it may be preferable to delegate the credit insurance: by transferring it from the factor to an insurer, it will be easier to negotiate client-by-client guarantees.
G. H. Take the example of a case handled last autumn. The factor of a home appliance trading company, whose activity was declining, had become restrictive. Not all factors react the same way to difficulty, so our mission was to quickly find a plan B, both to secure financing and to regain the original level of financing.
R. C. Thanks to our expertise in credit insurance, we even managed to recover a level of guarantees higher than the original programme. Credit insurance is also an important lever for improving financing in this type of situation.
G. H. One should never hesitate to question the credit insurance included in factoring contracts. Depending on the activity and the typology of clients, it may be preferable to delegate the credit insurance: by transferring it from the factor to an insurer, it will be easier to negotiate client-by-client guarantees.
Would you say that factors have a more conservative attitude in an economic context that continues to harden?
G. H. We observe disparate behaviours, although generally, factors are always open to discussion and ready to assist companies in difficulty. Some factors agree to start financing programmes during the procedure, while others prefer to act once an agreement has been reached with creditors.
R. C. If the factor is the company's bank, and the company requests debt renegotiation, it would be in the company's best interest to change the factor to spread the risks. Separating the bank and factor also allows the manager to regain some leeway and experience less pressure from the bank.
R. C. If the factor is the company's bank, and the company requests debt renegotiation, it would be in the company's best interest to change the factor to spread the risks. Separating the bank and factor also allows the manager to regain some leeway and experience less pressure from the bank.
"Factoring is the short-term financing with the best "cost/financed amount" ratio on the market, even in periods of high interest rates" - Gaëtan du Halgouët
You have had several clients nominated for the ARE* Ulysse Prize in recent years. Do you have a particular approach at Fibus for restructuring cases?
G. H. Our mission is to seek all possible financing pockets for all our clients, whether they are in a turnaround situation or not. We make sure to overlook no avenue. We do not hesitate to push our partners to innovate, to imagine new contracts to find a solution. This is also why we created a credit insurance department in addition to factoring and became a publisher of factoring and credit insurance software.
R. C. We developed our own digital solution, ARI. It allows the client to automatically manage and optimise their factoring and credit insurance programmes in a single interface, regardless of the number of clients, countries, and currencies. With ARI, Finance teams immediately see where the financing reserves to be activated are.
G. H. We have the largest team dedicated to factoring in the market, with sixty people. In restructuring, this allows us to quickly mobilise a team to respond to the urgency of cases. Our risk analyses are more thorough than elsewhere, and our tenders are ultra-documented: this allows us to save time and identify quick wins to maximise financing quotas.
R. C. We developed our own digital solution, ARI. It allows the client to automatically manage and optimise their factoring and credit insurance programmes in a single interface, regardless of the number of clients, countries, and currencies. With ARI, Finance teams immediately see where the financing reserves to be activated are.
G. H. We have the largest team dedicated to factoring in the market, with sixty people. In restructuring, this allows us to quickly mobilise a team to respond to the urgency of cases. Our risk analyses are more thorough than elsewhere, and our tenders are ultra-documented: this allows us to save time and identify quick wins to maximise financing quotas.
Do you have any particular projections to share for next year?
G. H. We know the situation will be mixed. On one hand, companies that will struggle to meet their debts and for whom factoring will allow repaying all or part of their loans. On the other, companies ready to invest in France or internationally, despite a challenging economic context. For these companies, factoring will remain the short-term financing with the best cost/financed amount ratio on the market, regardless of interest rate levels.
R. C. Payment delays will continue to lengthen and put company treasuries under pressure. We know that a new European regulation is being prepared to shorten payment deadlines to thirty days across the Union and for all activities. Its implementation promises to be complex: it is unlikely to replace the current European directive before 2025, but companies must prepare for it.
G. H. In this perspective, credit insurance has real cards to play, allowing companies to find additional financing margins while securing their activities.
R. C. Payment delays will continue to lengthen and put company treasuries under pressure. We know that a new European regulation is being prepared to shorten payment deadlines to thirty days across the Union and for all activities. Its implementation promises to be complex: it is unlikely to replace the current European directive before 2025, but companies must prepare for it.
G. H. In this perspective, credit insurance has real cards to play, allowing companies to find additional financing margins while securing their activities.
Key figures:
• 1,300 companies have been supported by Fibus since 2005, mainly SMEs and medium-sized enterprises
• 15% growth: Fibus advised more than 50 groups, i.e., more than 110 entities in 2023
• 37 countries covered: Fibus generates more than half of its turnover internationally
• 60 business experts in France and an office in London
*Papeteries du Léman (2023), Canal Toys (2020), Carbone Savoie (2019), Doux (2016), Symacom (2016), Anovo (2015).
Read the interview
• 15% growth: Fibus advised more than 50 groups, i.e., more than 110 entities in 2023
• 37 countries covered: Fibus generates more than half of its turnover internationally
• 60 business experts in France and an office in London
*Papeteries du Léman (2023), Canal Toys (2020), Carbone Savoie (2019), Doux (2016), Symacom (2016), Anovo (2015).
Read the interview
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