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International Trade Factoring

Who would have thought that tales of acquisitions, team transfers and meteoric expansion would belong to the factoring industry, for so many years a steady even slightly stodgy member of the financial family community. But it's true; factoring has recently been generating the kind of gossip more normally heard in the world of investment banking and dealing rooms.

The spotlight being shone now on the factoring industry by U.S. financial institutions is a vindication of what those inside the industry have always known. - That the combined receivables of a company comprise a valuable asset. They form an ideal basis for financing trade. In addition, by linking credit vetting and debt collection with the most modern methods of money and information transmission, a service can be offered which genuinely addresses a trading company's needs and can accommodate its growth.

The more astute factors have also known that by offering a choice of either the combined package of full factoring or a selection of its ingredients, for example invoice discounting or credit insurance linked facilities, they have an exceedingly winnable product range and hence, rather desirable businesses.

The depth of expertise within the U.K. factoring and discounting companies is proving attractive indeed to U.S. institutions looking to expand in Europe. BNY Financial no stranger to factoring in the U.S.; bought U.C.B. in the summer of 1997 and over Christmas consolidated its position by buying International Factors. GE Capital has established its interest in the field and Bank of America has set up a team. The betting is that at best one other U.S. bank will acquire a factoring capability in the near future.

Along with their financial resources, these institutions bring an expanded vision of financial solutions. The American concept of asset based lending includes the possibility of stocks, property and order book being used in addition to receivables as an asset on which to hook finance.

What does it all mean to the existing or potential client?

Well, on an individual level there is always the concern that service levels may falter as factors create or re-create themselves. On a more general level such upheaval usually leads to more competition and an increased attention to clients interests. There has probably never been more willingness to think with flexibility and innovation.

It goes without saying that companies should regularly review whether they are financing their trade in the most effective way. At the moment, factoring and discounting companies must definitely be on the list to explore.

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