Factors got on the chains – Newspaper Kommersant No. 32 (7477) of 02/21/2023

In 2023, factoring market participants expect to develop business secured by physical assets, increase the volume of transactions in friendly currencies and offer comprehensive supply chain financing programs, including for parallel import transactions. However, they fear new shocks that additional tools will not help to cope with. In addition, the supply chains that have been created over the past six months are hardly stable enough to be able to create package solutions for them.

The factoring industry is looking for new ways to recover and develop in the current difficult conditions (see Kommersant of January 16). In particular, in 2023, factors expect to develop Supply Chain Finance (SCF) services – comprehensive financing programs for suppliers, supply chains that allow organizing financing for an unlimited number of suppliers in a simplified mode, market participants note. In addition, companies are expanding the possibilities of working with the currencies of friendly countries (see Kommersant dated November 24, 2022). “The main drivers can be the development of trade with friendly countries in the national currency, attracting new liquidity to the market through CFA instruments, strengthening logistics ties and supply chains that began to form in 2022,” said Anton Musatov, CEO of VTB Factoring.

At the end of 2022, the AFC published data on the volume of SCF transactions for the first time. Thus, about two dozen, primarily the largest companies, provide such services. Their portfolio of SCF products at the beginning of 2023 reached 379 billion rubles, and the amount of financing amounted to 1.06 trillion rubles. The number of clients for SCF products for 2022 amounted to 1.19 thousand companies. “The SCF concept is ideal when a large buyer (customer, debtor) has several thousand small suppliers who need to pay their bills on time. The classical approach will require the factor to enter into thousands of factoring agreements in order to provide the “babies” with factoring; for the SCF model, one agreement with the buyer is enough. From an operational point of view, nothing changes for the factor, it just removes the need to set thousands of limits and increases the amount of capital placed,” explains Dmitry Shevchenko, Executive Director of AFK.

SCF as a procurement financing tool is suitable for new supply chains that have been created in the last six to nine months. Here, the factors can offer not only a service for setting limits, but also settlement solutions for friendly countries, Mr. Shevchenko notes. According to SCF programs, funds are transferred to suppliers, so import transactions are possible only if the factor does not have any restrictions on making cross-border payments, VTB Factoring notes. Demand for SCF products in 2023 will grow by at least 15-20%, according to AFK.

Another tool that can support the industry this year can be ABL financing, Anton Musatov is sure. Unlike classical factoring, where financing is secured by cash claims, ABL financing is secured by a physical asset, he explains. The tool may be in demand when working with SMEs, the financial condition of which may be more difficult to predict in a crisis. According to AFC, at the end of 2022, the portfolio of transactions with SMEs amounted to 130 billion rubles, which is 22% more than in 2021. The share of assets from transactions with SMEs in the market portfolio amounted to 9%.

However, not all market participants are so optimistic. “The difficulty of factoring financing of parallel imports lies in the fact that each transaction is unique, there is no possibility to create a boxed product. Accordingly, there is no standard approach to assessing risks, both financial and legal,” points out Boris Melnikov, General Director of Rosbank Factoring. And the use of friendly currencies in settlements, in his opinion, only adds variability in the organization of transactions, but does not fundamentally change the situation.

Polina Trifonova