Magazine: The risk is eliminated

Factoring services make life easier to plan and safer in general for SMEs. According to K&H’s expert Attila Bocsó, in the dynamically changing market environment it is of major importance to uncover hidden risks and manage them.

In the retail sector it happens more and more often that suppliers don’t get paid by their trading partners and this results in breaking up decades-long business relationships. The risk management and monitoring techniques of factoring companies can prevent the occurrence of such situations. What is more, factoring specialists tailor their services to partner needs, coming out with new solutions regularly. Sándor Aladics, OTP Bank Nyrt.’s SME business line director told our magazine that typically partners aren’t primarily looking for factoring but for financing services. Within OTP Bank’s SME services packages factoring is the perfect solution for those whose partners pay with a 60- or 90-day deadline and this delay causes cash flow problems to them. Factoring is faster than a loan and customers can get money in just 2 weeks and conditions are less strict. OTP Bank is a market leader offering full-scale factoring services and has 186,000 corporate customers; 60 percent of the bank’s factoring portfolio consists of onerous products. Géza Deme, the CEO of CIB Faktor Zrt. reckons that a growing number of companies realise that factoring is the best tool for financing claims. Based on long-term contracts, CIB Faktor finances the claims of suppliers until their regular partners finally make their delayed payments. The company also monitors claims and updates the claims database regularly, plus assists partners in claim collection, too. Since suppliers get 85-90 percent of their claim’s value right after issuing an invoice, they generate profit more often and can take bigger orders. With the appearance of the Lending for Growth Programme’s (NHP) factoring products, SMEs can now use CIB’s factoring services with excellent conditions. NHP factoring services are available at the same 2.5-percent interest rate as NHP loans and there is no other cost. László Kálmán, the head of Erste Bank’s SME business line sees a growing share for factoring services in the financing of SME customers in Hungary. Erste Bank’s goal is to strengthen its positions in the market and in addition to flexibility and a good price-value ratio in their services, their prices also decreased in the last few years. During the years of recession banks’ lending practices and customers’ risk sensitivity changed, and this contributed to the spreading of factoring services. A large proportion of Erste’s customers are from the FMCG sector, so the bank is familiar with the industry’s special needs. Zsolt Major-Maróthy, the head of MagNet Magyar Közösségi Bank’s factoring business line opines that by speeding up their cash flow, companies’ liquidity improves and their chances for market expansion grow. MagNet Bank Zrt.’s factoring division buys claim at gross price and pays a large proportion of the value instantly, while the remaining sum – with the costs deducted – is settled when the buyer pays. Generally the bank offers a guarantee for 80 percent of the claim’s value if the buyer doesn’t pay. They charge a factoring fee for the nominal value of claims; this is usually below 1 percent. A guarantee fee is charged monthly, calculated based on the size of the customer’s claims. Róbert Császi, corporate branch manager of Budapest Bank thinks that in the last 10-15 years demand was growing for factoring services. Budapest Bank is now busy familiarising customers with the advantages of factoring and claim buying. In most cases the bank pays maximum 90 percent of invoice value on the day after the purchase is made and collects the money from the buyer on the day when it is due, settling the difference between the two sums with the customer. The bank’s factoring services come with other services such as current account management.