Factoring Services Market (By Category: Domestic Factoring and International Factoring; By Type: Recourse Factoring and Non-recourse Factoring; By Application: Small & Medium Enterprise (SMEs) and Large Enterprise) - Global Industry Analysis, Size, Share, Growth, Trends, Regional Outlook, and Forecast 2022– 2030

The global factoring services market was estimated at US$ 3,393.91 billion in 2021 and is expected to hit US$ 7,005.91 billion by 2030, poised to grow at a CAGR of 8.9% from 2022 to 2030.

Growth Factors:

The rise in open account trading opportunities and the need for alternate sources of financing for Small & Medium Enterprises (SMEs) to meet immediate business goals or cash flows are expected to drive the growth of this market. The COVID-19 outbreak significantly affected global economic activities and caused stock market volatility, which hampered the growth of the market for a short term.

After the COVID-19 pandemic, the governments of several regions become the top competitor for factoring services providers as governments implemented forgivable programs and essentially zero cost money. However, businesses are finding alternatives such as remote working and other technological innovations to keep up with their competitors. Moreover, factoring services are utilizing technology to offer better services and are expected to show considerable growth over the forecast period.

Businesses often have to wait for customers to pay, which affects the cash flow. To remediate this delay, factoring companies are offering upfront cash in exchange for account receivables, which makes factoring services more preferable. Factoring services enable businesses to obtain working capital loans and mitigate credit risks. Moreover, the increasing adoption of cryptocurrency and blockchain among private sector non-banks is driving the growth of the factoring services market.

Scope of the Factoring Services Market

Technological advancements such as automated invoices with a unique id, smart contract facilities, transactional security management, and fast funding are expected to drive market growth in the coming days. For instance, Barclays Plc engages in corporate investment banking, and wealth management, among other solutions to offer flexible funding to organizations by allowing them to choose invoices committing to the entire sales ledger. Additionally, the bank would offer confidential whole-ledger discount services and assess organizations’ maximum credit limit against eligible outstanding invoices.

The factoring companies have another advantage that they can integrate well with the organizations’ existing accounting software, which leads to no admin hassle, and employees can focus on important jobs instead. Since factoring companies serve various industries, their rates and level of customer service may vary and the ability to complete the process and provide advance payment within 24 – 72 hours makes the service faster than bank loans.

The factoring service mitigates credit risk by completing the responsibility of debt collection. However, new technologies are helping factoring companies to better serve customers by giving them access to web portals and applications to review and answer common questions related to their accounts. Additionally, benefits such as cost-effectiveness, powerful insights and reporting, and thorough credit evaluation are expected to increase the demand for factoring services.

The factoring services are helpful in many ways, such as the need for secure financing, which is subject to strong fluctuations due to seasonal changes in the marketplace. To overcome financial issues, organizations depend upon factoring services to provide financial stability such as security against payment defaults, reduced cost of maintaining sales ledger, cash rebates offered by suppliers, and debtor management services. Businesses involved in logistic and manufacturing services find factoring as an ideal way of financing, as these firms have numerous accounts receivable from other businesses.

Category Insights

Based on thecategory, the domestic factoring segment accounted highest share of 70% in 2020. The domestic factoring is carried out within a country. Domestic factoring refers to the acquisition, funding, management, and collection of short-term accounts receivable deriving from the supply goods and services to domestic customers. The goods are distributed on a 180-day open account credit basis.

On the other hand, the international factoring is the fastest growing segment during the forecast period. For businesses involved in the import and export of goods and services, international factoring is a must-have service. Importers frequently demand account trade and longer payment terms from companies engaged in international trade, regardless of their size or industry. This entails receiving money several weeks after the invoice date.

Type Insights

Based on the type, recourse factoring led the market with highest share in 2020. Recourse factoringis agreement between a customer and a factor in which the client agrees to buy back the factor’s unpaid accounts receivable. As a result, in the event of non-payment by the debtor, the credit risk remains with the client.

On the other hand, non-recourse factoring is expected to grow at a faster rate during the forecast period. The customer and the factor enter into a non-recourse factoring agreement in which the factor assumes responsibility for absorbing any unpaid bills receivables. As a result, the unpaid invoices have no impact on the firm. 

Application Insights

Based on the application, the small and medium enterprises (SMEs) is likely to dominate the factoring services market in 2020. As small and medium enterprises (SMEs) are the primary adopters of this financing facility, and the interest rates for both recourse and non-recourse factoring are almost same around the world, the global factoring services is anticipated to be dominated by small and medium enterprises (SMEs).

On the other hand, the large enterprises segment is expected to grow at a fast rate during the forecast period. The large enterprises’ increased need for non-recourse borrowing is likely to promote short-term financing in emerging nations, ensuring debt security, employment, and growth possibilities.

Regional Insights

The European region accounted for a major market share of over 55.1% in 2021. This is attributed to the rapid adoption of factoring services in Central and Eastern Europe (CEE) and the strategic importance of receivables funded by the commercial banking sector. The region has the presence of fast-growing banks and is experiencing increased trade with fast-growing markets in Eastern bloc countries. Various service providers of this region are focusing on automating the process by utilizing advanced technologies such as blockchain, which provide advanced data security and smart contract functionality.

Asia Pacific is expected to witness considerable growth over the forecast period owing to the expansion of the manufacturing sector in economies such as India and other South & Southeast Asian countries. These countries are shifting from agrarian to manufacturing and export-oriented economies, which is propelling the growth of the market in the region. The presence of developing economies such as China and Thailand is promoting investments from developed markets that are saturated and exploring new opportunities. These factors are likely to spur the demand for factoring services in the region.

Some of the prominent players in the Factoring Services Market include:

• The Southern Banc Co. Inc
• Advanon AG
• BNP Paribas Cardiff
• Mizuho Financial Group Inc.
• Deutsche Leasing AG
• Riviera Finance of Texas Inc.
• SocieteGenerale SA
• Eurobank Ergasias SA
• Hitachi Capital PLC
• Triumph Business Capital

Segments Covered in the Report

This research report offers market revenue, sales volume, production assessment and prognoses by classifying it on the basis of various aspects. Further, this research study investigates market size, production, consumption and its development trends at global, regional, and country level for the period of 2017 to 2030 and covers subsequent region in its scope:

By Category

• Domestic Factoring
• International Factoring

By Type

• Recourse Factoring
• Non-recourse Factoring

By Application

• Small and Medium Enterprise (SMEs)
• Large Enterprise

By Geography

North America

• U.S.
• Canada

Europe

• Germany
• France
• United Kingdom
• Rest of Europe

Asia Pacific

• China
• Japan
• India
• Southeast Asia
• Rest of Asia Pacific

Latin America

• Brazil
• Rest of Latin America

Middle East & Africa (MEA)

• GCC
• North Africa
• South Africa
• Rest of Middle East & Africa

Key Points Covered in Factoring Services Market Study:

• Growth of Factoring Services in 2022
• Market Estimates and Forecasts (2017-2030)
•  Brand Share and Market Share Analysis
•  Key Drivers and Restraints Shaping Market Growth
•  Segment-wise, Country-wise, and Region-wise Analysis
•  Competition Mapping and Benchmarking
•  Recommendation on Key Winning Strategies
•  COVID-19 Impact on Demand for Factoring Services and How to Navigate
•  Key Product Innovations and Regulatory Climate
•  Factoring Services Consumption Analysis
•  Factoring Services Production Analysis
•  Factoring Services and Management