10.03.2010

The German factoring market in more detail

2009: First-time decrease in factoring turnover to 96.21 billion Euro, despite increase in new customers

For the first time in its history, the German Factoring Association, Deutscher Factoring-Verband e.V. (DFV), noted a significant decrease in turnover: In 2009, the total turnover of the 25 (in 2009: 26) factoring companies associated in the German Factoring Association declined by 7.6 billion Euro to 96.21 billion Euro. In comparison with 2008, this represents a decrease of 7.34%.

“The slumps affecting existing customer relations also had an influence on factoring. There were decreases in turnover of up to 40% and more”, as Joachim Secker, spokesman of the DFV’s executive board, summarizes the underlying reasons for the decrease.

Simultaneously, there was a striking demand for factoring by new customers, especially SMEs: Within only one year, the number of customers rose from approximately 5450 in 2008 to 8840 in 2009. This means an increase of 62%, which is remarkable even when taking certain statistical factors into account, such as changes and growth in the DFV’s membership. The background to this noteworthy development lies in customers (successfully) trying to substitute regressing loan financings, especially regarding receivables of amounts typical for SMEs. Especially during the crisis, factoring was more in demand than ever before as an alternative means of financing.

Notwithstanding the clear decrease of the German GDP in 2009, the factoring-ratio (indicating the ratio between the GDP and the total of outstanding balances of receivables bought by factoring companies) rose by 0.4% to 4.0% - a positive result in times of crisis. As expected, the average collection period was prolonged slightly by 0.5 days to currently 41.1 days. Hence, customers tended to delay payments for a little longer in these economically difficult times, compared to the previous year (2008: 40.5 days).

In the year under review, the key industries for the German factoring industry were: trade and trade negotiation, the food/nutrition industry, manufacturing of metal products and machine construction, electronics and electronical elements, services, manufacturing of chemical products, metal production and processing, the paper, publishing and printing industry, other manufacturing industries and the health service sector. Especially in areas dependant on export trade, expected changes due to the crisis became reality. This is why e.g. metal production and processing in 2008 was number 3 in the list of key industries for the German factoring industry, while dropping down to number 7 in the ranking of 2009.

However, the relation between the different forms of factoring (with regard to the turnover) hardly changed in 2009: Inhouse factoring continues to dominate with 78% over  standard factoring (19%) and maturity factoring (slightly over 2%).

In 2009, Germany handed over its title as world leader in export trade to China. One of the effects of this development was that the total turnover in international factoring declined for the first time ever, from 30.15 billion Euro in 2008 to 25.84 billion Euro in 2009 – a decrease by 14.32%. The drop in turnover in the export trade business amounted to minus 13.56% compared to 2008 (27.66 billion Euro in 2008 as against 23.91 billion Euro in 2009). In the import trade business, the decline in turnover of minus 0.57 billion Euro to 1.92 billion Euro in 2009 (compared to 2.49 billion Euro in 2008) even meant a slump of 22.75%.

Taking into consideration the great increase of debitors to 3.2 million in 2009 (2008: 2.5 million), the new German federal government should finally put the economic stimulus package of March 2009 into practice and implement measures to improve the liquidity situation of factoring companies as it was promised a year ago. An SME-oriented solution similar to the one which was only recently found for leasing companies would be linking-up the factoring companies to the KfW, a promotional bank under the ownership of the Federal Republic and the federal states.

Due to the continuing increase in business from new customers, more than 43% of the DFV’s members expect a good or very good economic development during the first six months of 2010. Nevertheless, 2010 will once again be a rather challenging year for the German factoring industry, also because of the difficult situation with regard to refinancing.