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| Factoring Services Market |
Factoring services refer to financial transactions in which a business sells its accounts receivable to a third party at a small discount. Factoring firms advance money on invoices for products or services delivered to customers. By doing so, factoring services help businesses to improve their cash flow and gain access to working capital funds immediately rather than waiting for customers to pay invoices. The growing need for working capital among small and medium enterprises (SMEs) has been a key driver for the factoring services market.
The global factoring services market is estimated to be valued at US$ 7,347.43 Bn in 2024 and is expected to exhibit a CAGR of 7.6% over the forecast period from 2024 to 2031.
Factoring
services help SMEs to manage expenses like wages, raw materials, inventory and
rent on time. This has boosted the adoption of Factoring Services Market Size
especially among small businesses in developing economies.
Key Takeaways
Key players operating in the factoring services market are altLINE (The
Southern Bank Company), Barclays Bank PLC, BNP Paribas, China Construction Bank
Corporation, Deutsche Factoring Bank, Eurobank, Factor Funding Co., Hitachi
Capital (UK) PLC, HSBC Group, ICBC China, Kuke Finance, Mizuho Financial Group,
Inc., RTS Financial Service, Inc., Société
Générale S.A., and TCI Business Capital. These key
players are focused on expanding their business operations across various
emerging markets through collaborations and partnerships with local financial
institutions.
Key opportunities in the factoring services market include growing demand from
SMEs in Asia Pacific and Latin America. Factoring penetration is relatively low
in these regions compared to developed economies. The favorable government
policies and initiatives to support SME growth offer significant potential for
factoring service providers in Asia Pacific and Latin American countries.
Fueled by increasing globalization of trade, major factoring companies are
actively focusing on global expansion. Large factoring firms are entering new
markets through mergers and acquisitions. They are leveraging technology to
offer cross-border factoring facilities and supply chain financing solutions to
multinational clients. The digitalization of factoring services is also
supporting companies to expand globally and cater to the needs of international
clients.
Market drivers
Growing SME sector globally: SMEs account for over 90% of businesses worldwide
and are major job creators. However, limited access to working capital
continues to hamper SME growth. Factoring services help address this challenge
by unlocking cash from unpaid invoices. The rapid growth of SME sector
especially in developing economies will drive the demand for factoring
services.
Advantages over bank loans: Factoring provides faster access to capital
compared to traditional bank loans. It also has simpler qualification criteria
and procedures. This has increased the adoption of factoring among small
businesses with limited collateral and financial resources to obtain bank
financing. Factoring offers a better alternative to bank loans for SME
financing needs.
Market restrain
Higher fees compared to bank loans: Though factoring provides faster access to
capital, the fees involved are usually higher than conventional bank loans.
Cost of factoring increases further if customers delay payments or default on
invoices. This makes factoring an expensive option for short-term financing
needs.
Segment Analysis
The Factoring Services market can be divided into domestic factoring and
international factoring. Domestic factoring dominates the market as most
businesses typically factor their domestic receivables. Small and medium
enterprises account for the largest share in domestic factoring as they have
limited resources and access to working capital. Factoring provides SMEs with
immediate access to cash which helps them meet short-term obligations and grow
their business operations.
Large corporates also utilize factoring but mainly for international
receivables. Cross-border trade introduces complexity and risks which make
international factoring attractive for large corporations dealing in
international business. Recourse and non-recourse factoring are the main types,
with non-recourse factoring being more popular as it protects businesses from
default risks of their customers.
Global Analysis
The Factoring Services market in Europe dominates currently with over 40% share
due to developed factoring industry and supportive regulations in major
countries like Germany, France, and UK. However, the Asia Pacific region is
projected to grow the fastest during the forecast period due to rapid economic
growth, increasing international trade, and developing factoring markets in major
countries like China and India. China, in particular, is anticipated to emerge
as the fastest growing regional market fueled by Government initiatives to
promote factoring among SMEs. North America follows Europe with significant
market presence across US and Canada supported by well-established players.
Meanwhile, factors markets across Latin America, Middle East & Africa are
at a nascent growth stage with potential for high growth.
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