Factoring companies are switching to a new direction – commodity factoring
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Factoring companies are gradually switching to a new direction – commodity factoring (ABL). While its volumes are small, up to 50 billion rubles. in general, and the product is offered by several largest companies, primarily in the automotive industry. New players may enter the segment throughout the year. At the same time, market participants recognize that this direction will require the development of new competencies in assessing the commercial activities of the counterparty, and also creates additional risks.
Factoring companies are beginning to develop a new direction – commodity factoring (ABL), according to a Kommersant survey. Now it is offered by large market participants, VTB Factoring, SberFactoring and PSB, as well as the small Topcom Finance. Ingosstrakh Bank plans to enter the segment by the end of the year. Now he is testing the solution together with the fintech startup FinTrack, said Stanislav Danysh, chairman of the bank’s board. They are working on introducing “a new product in the logic of ABL financing” and in “RSHB Factoring”.
Commodity factoring is financing the purchase of warehouse stocks with their subsequent sale to customers. Market participants currently estimate the ABL financing portfolio at RUB 20–50 billion. In the future, according to Igor Vnukov, General Director of VTB Factoring, “the volumes of the segment can be comparable to the volumes of the factoring market itself and reach trillions of rubles.”
Factoring — operational short-term financing of companies for the assignment of their receivables. According to the Association of Factoring Companies (AFC), at the end of 2023, the market portfolio amounted to 2.26 trillion rubles, which is 57% more year-on-year. The volume of disbursed financing reached RUB 7.72 trillion, an increase of 22%. The client base grew by 20%, to 15 thousand companies. At the end of the year, the SFC portfolio (supply chain finance) reached almost 643 billion rubles. (see “Kommersant” dated February 16).
The impetus for the development of ABL financing was the events of 2022 and their consequences in the form of sanctions and the dismantling of existing cross-border supply chains, experts say. “Under these conditions, the demand for inventory financing has increased sharply. The main advantage of the product is the client’s confidence that if demand for it grows, he will be able to satisfy this demand,” explains AFK executive director Dmitry Shevchenko. In addition, VTB clarifies, “the potential of agency factoring as a source of market growth has been largely exhausted.”
According to Igor Vnukov, 80% of ABL financing now comes from the automotive industry. At the end of 2023, trade in cars and motor vehicles accounted for 37.7 billion rubles, as follows from the materials of the AFK. The product is especially in demand by car dealers and distributors, as it is highly protected from the risks of dealer defaults and adaptable to the individual needs of sellers, says SberFactoring CEO Igor Lysenko: “The volume of buybacks is not limited and is formed by the dealer depending on the needs of the end buyer. Commodity factoring allows dealers to convert current equipment inventories into working capital and creates a comfortable basis for business expansion.”
However, the tool also works in other areas. “We offer a standardized product for oil traders, and are also testing this format in the real estate and grain markets,” said PSB Managing Director for Factoring Innokenty Volovik. Ingosstrakh Bank is going to launch a product for trading companies, and in the future – for dealers of special equipment, said Stanislav Danysh.
However, not all market participants are ready to engage in commodity factoring. The development of ABL financing is slowed down by low awareness and an increased level of complexity associated with the need to conduct a detailed analysis of the client’s assets, explains Mikhail Yatsenko, CEO of RSHB Factoring. According to the general director of Rosbank Factoring, Boris Melnikov, this approach will require “an increase in the operational load: it is necessary to carry out the entry and exit of the provided objects from collateral, control the location of the collateral objects in the designated place and, if the risk materializes, its subsequent implementation.” In addition, notes Kommersant’s interlocutor in the factoring market, it is necessary to have “liquid reserves with a long useful life in the amount of 250 million rubles. and be prepared for long-term asset turnover – up to 150 days.”
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