The German factoring market 2010

16.03.2011

Factoring 2010: Turnover grows by unprecedented 37%

While a significant decrease in the total factoring turnover could be noted in 2009 as a consequence of the financial crisis, the German factoring market experienced an unprecedented boom in 2010: The total turnover of the 26 factoring companies associated in the German Factoring Association increased by remarkable 37.48% and reached the record-breaking figure of 132.28 billion Euro (2009: 96.21 billion Euro). The prominent growth which could be noted during the first half of 2010 (increase by 38%) therefore continued throughout the whole of 2010.

“The customers who got to know factoring during the financial crisis and hold it in esteem have evidently remained faithful to this financial service even after the turnaround in 2010”, as Joachim Secker, spokesman of the DFV’s executive board, summarizes the underlying reasons for the strongest increase in factoring turnover so far.

Furthermore, the number of new customers grew dynamically: Currently, approximately 12,000 customers use factoring, an increase by 36% in comparison to 2009 (8,840). During the financial crisis, companies mobilised their reserves and the widely feared credit crunch was largely avoided by protective screens put up by the state in order to stabilise the real economy and financial markets. Nevertheless, many companies need new funds and liquidity now in order to gain from the economic revival. Especially funds for the means of production and going concern as well as for stocking up of warehouses currently need to be provided. Factoring apparently was and continues to be the solution to this problem for many (new) customers.

As a result of the strong growth, the factoring ratio (indicating the ratio between the GDP and the total of outstanding balances bought by the factoring companies associated in the German Factoring Association) cleared the magical 5%-hurdle for the first time. Effectively, this means that a remarkable 5.3% of the entire German GDP was financed through factoring.

Interestingly, the average collection period remained unchanged at 41.1 days, just as during the financial crisis. This points to debtors obviously not paying as promptly as they did before the crisis (2008: 40.5 days). The grown total of outstanding balances bought by factoring companies and the increase in factoring customers also become noticeable in the number of debtors, which also rose, this time to 3,964,000 (an increase by 22% in comparison to 2009).

In the year under review, the key industries for the German factoring industry were the following: trade and trade negotiation, food/nutrition industry, services, manufacturing of metal products and machine construction and vehicle manufacturing (top 5). Of these key industries, services notably gained: While this industry was still number five in 2009, it rose to number three in 2010. Vehicle manufacturing also worked its way up from number ten to number five – an indicator of the rising export levels after the crisis. The health service sector’s significance increased, too, and went up by one position.

The relation between the different forms of factoring (with regard to turnover) changed in favour of inhouse factoring, which currently amounts to 81% and therefore lies clearly ahead of full service factoring (16%) and maturity factoring (just over 2%).

As the worldwide demand for products “made in Germany” increased again during the year under review, international transactions developed positively: The import trade business increased by a staggering 42.39% to currently 2.74 billion Euro (after having decreased to 1.92 billion Euro during the crisis) while the export trade business rose to 30.12 billion Euro, a step-up by 25.98% (2009: decrease by 13.56%). In 2010, Germany benefited greatly from the investment boom of threshold countries that need to build up and expand their infrastructure in transportation, communication and energy and also to modernise their machinery, last but not least due to their demographic situation. On top of this, the relatively low Euro exchange rate can be considered as a favourable stimulus for exports from the Eurozone to the dollar area.

Due to the continuous strong interest in factoring services, remarkable 83% of the factoring companies associated in the German Factoring Association expect good or very good economic development for the first half of 2011. Notwithstanding, it is necessary to take into consideration that world trade and German export trade business were facilitated and promoted in an unforeseen way by the worldwide economic stimulus packages which are now expiring. Therefore, there are still risks to the further economic upturn, last but not least because some European countries still suffer the consequences of the financial crisis and also because the debt and currency crisis substantially curtails the Euro macroeconomically and the national governments’ room for manoeuvre. Moreover, the flooded currency markets entail the medium-term danger of pent-up inflation and interest rate risks, which may have an immediate effect on the capital procurement costs in the factoring industry.