Currently, most of the banks do not lend money, as they are constrained in their active operations by the lack of credit resources due to the need to constant necessity to return deposits. But life goes on and more far-sighted banks, knowing that the crisis will soon be over and the new serious struggle for customers will be unfold, prefer to carry out the necessary work to increase the customer base already using banking products such as factoring, lines of credit and bank guarantees. All of these products have one important feature – they encourage customers to work with the banking institution and increase its business activities. When used properly, they can increase the credibility of the company by its partners, which is theguarantee of survival of business in our difficult time.
Factoring as a means of reducing the risks in the business
This bank product is actively operated in several banks on the Ukrainian market. The mechanism of factoring operations can increase the volume of business by increasing commodity credit to debtors, improves the quality of the management of receivables and payment discipline of contractors of the providing company, as apart from it in the process of monitoring the timely repayment of the receivable receives the bank.
According to the Director of Sales of Corporate Business Fidobank Andrew Kostiuk, this is an interesting financial products for companies operating in the FMCG manufacturing and trading (food, beverages, household chemicals, etc.). The bank offers this service in local currency at a rate of up to 85% of the cost of debt transferred to factoring. Deferred payment is available for 90 days and at the same time the company has 30 days to resolve the issue with his counterpart repayment process. The volume of transactions on the bank factoring is a few tens of millions in national currency.
The cost of such borrowing in various banks depends on the cost of resources on the market, ranging from the period of deferred payment and payment discipline of the debtor. Bankers do not plan to make significant changes in conditions or more stringent requirements of banks to companies before the end of the year. This allows the bank not only to increase the volume of customer balances on accounts, but also to sell them additional banking services and to make cross-bank marketing. For example, since a significant portion of such clients are trade enterprises, they have growing cash and cashless trading revenue, which in turn enables the bank to offer such enterprises collection services, install ATMs on shops sites, set payment terminals, etc. Everybody wins: both the bank and customers.
For many companies factoring is more attractive than the usual lending.
«We are manufacturing dairy products, some of which are intended for industrial B2B processing: condensed milk, dried milk products. So many of our customers of B2B sector want sufficiently long delay of payment – from 60 days or more. Factoring allows us not to lose working capital to finance receivables. Since in this case the bank issues are resolved fairly quickly. We do not need to seek a bail for an attracted loan, bear the costs for its assessment, insurance, maintenance of safety»., – said Andrey Belotserkovskii, CFO Kupyansk IWC, specializing in the production of dairy products.
Factoring is better than the loan for companies in terms of documentation.
«For our company factoring reduces paperwork and extra costs that exist in lending. If you compare interest rates when lending for working capital and factoring – the second obvious advantage in lower costs from the company during the registration and maintenance. In factoring form of cooperation banks is provided with document, bills and the money on the account – everything is much easier and more quickly than in the case of loans,» – said Belotserkovskii.
According to Andrew Solopov, CFO DP “Electrolux LLC” specializing in the sale of household appliances, the key advantage of factoring is the possibility of getting money in the date previously agreed with the customer.
«We are interested in factoring, primarily as in the tool of reducing receivables in the balance sheet and thus reducing the risk of non-payment by debtors. Therefore, we consider factoring without recourse of trade financing as the tool of reducing the risk of trade finance of customers».