'Factoring continued to grow in Germany' despite pandemic


Germany’s GDP in 2020 fell by almost five per cent to EUR 3.33tn, said Jens Hoter, CEO of Eurofactor GmbH, Germany in the article about factoring development in Germany, included in the most recent edition of World Factoring Yearbook.

The Corona crisis has led to the worst slump in economic growth since the Second World War. However, contrary to the initial pessimistic forecasts, factoring continued to grow: the overall result for 2020 showed a 1.3 per cent increase in total factoring volume to EUR 279.2bn, an impressive result in the pandemic year. The GDP factoring penetration ratio continued to climb, reaching 8.4 per cent. This is a strong development, and it shows that the highly efficient German factoring industry with just over 4,600 employees has proved to be very robust, even in times of crisis.

INDUSTRY ENVIRONMENT

Clients

Factoring contributed its share in helping to maintain financing for companies and supply chains during the pandemic, with over 82,400 customers using factoring in 2020. Even in the year of the pandemic, factoring has proven to be a suitable financing instrument for small, medium and large companies, with a particularly noticeable trend towards small and medium-sized customers, both in terms of number and volume. Regarding client numbers, 95.4 per cent of customers have a turnover of up to EUR 10m (typical SME segment), which is an increase of two per cent compared to 2019 (93.4 percent). There was also an increase in the SME segment’s share of total factoring turnover from 19.5 per cent in 2019 to 28.8 per cent in 2020. The mid-range segment’s share, that is, clients with a turnover of EUR 10m to EUR 50m, on the other hand, fell from just under 25 per cent in 2019 to 20.7 per cent of the total factoring turnover in 2020. The big-ticket companies - that is, companies with a minimum turnover of EUR 50m - continue to dominate with a share of more than 50 per cent of total factoring turnover.

Debtors

At the end of 2020, the German Factoring Association’s members had open items against just under 6.5 million debtors. The number of accounts receivable per company fluctuated between 50 and over two million accounts receivable, due to the very different business areas (including B2C / health sector with significantly higher accounts receivable).

The average DSO increased by one day to 41.8 days (compared to 40,7 days in 2019), which is no surprise in a pandemic crisis. The Corona situation had a particularly large impact on the international factoring business, because here the collection period increased by 2.1 days to 53.2 days. This was especially noticeable in export factoring, where the payment period even increased by almost three days to now over 57 days. The difference between domestic and international payment behaviour is already over two weeks.

MARKET PERFORMANCE AND SUPPLY

After a serious slump in the first half of 2020, the German economy initially seemed to have coped with the consequences of the pandemic better than expected, and the German factoring market was able to achieve a turnover of EUR 134.9bn which represented a growth of 1.6 per cent compared to the first half of 2019. However, the persistence of the pandemic and, in particular, the renewed partial lockdown since November 2020 (which depressed this trend), coupled with the lower factoring sales in the second half of the year, resulted in an overall market growth of 1.3 per cent for 2020, somewhat lower than in the first half of the year.

In 2020, domestic factoring turnover grew by 2.7 per cent, reaching EUR 210.2bn. In contrast, there was a decline in international factoring sales of 2.7 per cent to EUR 69bn, with import factoring declining 8.1 per cent to EUR 4.4bn. The decline in the country’s export volume, of ‘only’ 2.3 per cent, was significantly lower than initially expected, especially since the decline in the real economy was as much as 9.9 per cent. The protective screen of credit insurances probably prevented an even worse development.

To read the whole article and much more, order World Factoring Yearbook 2021 here.