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Strong growth in the factoring market

Published on September 07, 2022 by Pierre Belhache - 3 mins reading time
SMALL BUSINESSES Companies

After a sharp drop in sales in 2020, at the start of the health crisis, the factoring market has been regaining its vitality since last year. Production reached a record level in 2021, and 2022 looks just as promising.

Factoring: record production of 364.9 billion euros in 2021

Factoring is a financing technique that enables companies to benefit from a cash advance, by transferring their invoices awaiting payment to a specialized company called a "factor", which takes care of reminders and collection.

At present, 32,000 French companies use this financing solution, which saw its activity plummet in 2020 due to the health crisis, and more particularly because of competition from state-guaranteed loans.

In 2021, the rebound was such that a record level of activity was reached, with 73,050,000 new claims taken on for a total amount of 364.9 billion euros, according to figures in the annual report of the French Association of Financial Companies (ASF) published on Tuesday September 6.

After a slight dip in Q1 2021, activity then rose steadily over the following 3 quarters, recording an increase of 12.8% on 2020, and 4.3% on 2019.

 

17% growth in Q1 2022

The factoring market, which is benefiting from the dynamism of international business, up 22.4% on 2020, has benefited from several favorable factors in 2021.

These included companies' need for short-term financing to replenish inventories as business picked up, as well as the start of repayment of state-guaranteed loans, which gave way to a new need for cash.

Growth is also due to rising inflation, which leads to higher bills and therefore, mechanically, higher outstandings.

Factoring professionals are even more optimistic for 2022. Periods of crisis, such as 2008, are particularly conducive to a surge in factoring activity, to offset the decline in bank financing.

2022 is set to be another record year for the sector, which has already recorded growth of 17% in the 1st quarter. According to Philippe Mutin, Chairman of ASF's Factoring Commission, production should pass the 400 billion euro mark by the end of the year.