The Impact of the Global Financial Crisis on the Factoring Industry
Summary of Key Points
Initial volumes down, then steady growth thereafter
Invoice payment terms up and still rising
Defaults flat, trend line not anticipated to change
Factor’s earning up once volume returned
Need for Factoring has steadily grown post GFC
Like many small- and medium-sized businesses, the factoring industry encountered challenges during the GFC stemming from liquidity constraints and an economic downturn affecting various sectors. Reduced sales, financial difficulties, and heightened credit risk had a direct impact on the factoring industry that manifested in lower volumes of factored invoices. The overall economic slowdown simply meant fewer invoices were available to fund, yet, amid difficulties in obtaining traditional bank financing, other small and medium businesses turned to factoring as an alternative source of working capital and volumes picked up steadily post-2009.
