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The Global Factoring Services Market size is estimated to grow at a CAGR of 7.54% between 2022 and 2027. The size of the market is forecast to increase by USD 1,720.41 billion. The growth of the factoring services market depends on several factors, including the increasing need for alternative financing sources for MSMEs to improve inventory management and liquidity for efficient working capital management. MSMEs require financing to expand their business, develop new products, and invest in better inventory management systems and production facilities. Financing can be obtained from either internal or external sources. However, due to the limited availability of funds with these firms, they often resort to external sources of financing, such as loans from banks, investments from venture capitalists, factoring, and others. Factoring businesses offer working capital loans that help mitigate credit risks and provide dynamic incentives, such as providing loans without start-up or termination fees.
This factoring services market report extensively covers market segmentation by type (domestic and international), application (SMEs and large enterprises), and geography (Europe, APAC, South America, North America, and Middle East and Africa). It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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The growing need for alternative sources of financing for MSMEs is notably driving the factoring services market growth, although factors such as the lack of a stringent regulatory framework for debt recovery mechanisms in developing countries may impede market growth. Our researchers analyzed the data with 2022 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Key Factoring Services Market Driver
The increasing demand for alternative sources of financing for MSMEs is a major factor in driving the global factoring services market. Financing is essential for MSMEs to expand their business operations, manufacture new products, and invest in better inventory management systems and production facilities. Internal or external sources are used for financing. The limited availability of and lack of access to funds among these firms compels them to opt for external sources of financing, which include loans from banks, investments by venture capitalists in their business, factoring, and others.
Factoring businesses offer working capital loans to help mitigate credit risks by creating dynamic incentives, such as providing loans without start-up fees or termination fees. Receivables financing, bill discounting, and factoring can take the place of the prerequisites of working capital financing, thereby catering to the special needs of MSMEs. Local vendors in emerging markets have the best monitoring capabilities and knowledge of MSMEs. This allows the structuring of working capital finance and channelling finance and cash credits that can meet the needs of such enterprises and firms, thereby generating huge economies of scale. Such factors will drive the growth of the global factoring services market during the forecast period.
Key Factoring Services Market Trends
The growth of the factoring services market is being propelled by the adoption and advancement of blockchain technology. Blockchain, which is the underlying technology of Bitcoin and other cryptocurrencies, is gaining widespread acceptance as a mainstream payment mode and is driving value growth. Its potential to transform various industries, including factoring and stock markets, is evident from the use of blockchain by the National Association of Securities Dealers Automated Quotations (NASDAQ) in its private share-trading market.
Innovations in the blockchain space are expected to lower the initial set-up cost for vendors and digitize the factoring process, resulting in better technology to record trade transactions and easy access to information for all stakeholders, including factors, buyers, and sellers, on a single platform. This will lead to a reduction in risks and drive the growth of the global factoring services market during the forecast period.
Key Factoring Services Market Challenge
The lack of a stringent regulatory framework for debt recovery mechanisms in developing countries is a major challenge to the global factoring services market growth. The factoring services market faces challenges due to weak tax and legal and regulatory barriers. In developing countries, weak infrastructure also creates more bottlenecks for the collection of receivables. For instance, collecting payments from government-owned firms can be difficult for factors. In the conventional accounting system, the current portion of long-term debt (CPLTD) is considered a liability. This is because it is the money due only in the current period, as the debt is to be repaid from the conversion of current assets into cash. Therefore, corporates with large, fixed assets and CPLTD have tighter working capital, thereby leading to negative working capital.
Factoring companies have no collateral security. A look at the global market scenario also shows that credit insurance is highly prevalent in factoring businesses, which helps mitigate risks and increase the exposure of the clients. In the absence of recourse financing and the rise in frauds and defaults committed by debtors, the factoring services market is expected to become less attractive to new entrants during the forecast period.
Key Factoring Services Market Customer Landscape
The report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Factoring Services Market Customer Landscape
Vendors are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Abs-global-factoring.de - The company provides a range of factoring services including options for start-ups, export businesses, and restructuring. Additionally, the company offers financial and liquidity services under this segment to safeguard against bad debts.
The report also includes detailed analyses of the competitive landscape of the market and information about 15 market vendors, including:
Qualitative and quantitative analysis of vendors has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize vendors as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize vendors as dominant, leading, strong, tentative, and weak.
The market share growth by the domestic segment will be significant during the forecast period. In domestic factoring, all three parties, including the factor, the buyer, and the seller, are based in the same country and are subject to the same laws and regulations. Domestic factoring involves all parties, including the factor, buyer, and seller, being based in the same country and subject to the same laws and regulations. This type of factoring provides short-term working capital and cash flow to MSMEs for domestic sales. For instance, if a seller sells a product to a buyer in the same country, the seller can turn to a factor for domestic factoring and raise funds against their account receivables. The domestic segment of the global factoring services market has been gradually increasing its market share, reaching USD 2,030.52 billion in 2017 and continuing to grow through 2021. Domestic factoring is particularly popular in regions such as APAC, Africa, and South America. As the number of domestic businesses in various regions continues to rise, the domestic segment of the global factoring services market is expected to grow at an even faster rate during the forecast period.
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The international segment is categorised into three international factors, namely, export factoring, import factoring, and export invoice discounting. Export invoice discounting is utilized when buyers and sellers belong to different countries. In this type of international factoring, the factor provides immediate funds to a business against its unpaid invoices. Export factoring, on the other hand, involves the factor providing factoring services to the seller for goods and services sold to foreign buyers. Import factoring involves the factor providing funds to a company to purchase goods or services from sellers in other countries.
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Europe is projected to contribute 60% by 2027. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.
In Europe, the factoring market is dominated by major banks, which provide over 85% of invoice finance services. The total turnover for the factoring and commercial finance industry across the European Union (EU) was $2.0 trillion in 2020. The EU Federation for Factoring and Commercial Finance (EUF) members accounted for almost 94% of the turnover in the EU, with the top five countries making up nearly 73% of the total market. The factoring industry turnover represented 12.6% of the EU's GDP in 2020. The top five markets in Europe include the UK, France, Germany, Italy, and Spain. The EUF and other associations are trying to increase awareness and accessibility of finance in Europe. The focus is on MSMEs and on ensuring that financing is well-structured and prudent across business segments in the EU during the forecast period. Europe supports lending to SMEs, which will positively impact the economy of the region during the forecast period.
The report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027. The market has been segmented by type, product, distribution channel, and region.
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Factoring Market Scope |
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Report Coverage |
Details |
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Page number |
156 |
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Base year |
2022 |
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Historic period |
2017-2021 |
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Forecast period |
2023-2027 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 7.54% |
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Market growth 2023-2027 |
USD 1,720.41 billion |
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Market structure |
Fragmented |
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YoY growth (%) |
6.58 |
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Regional analysis |
Europe, APAC, South America, North America, and Middle East and Africa |
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Performing market contribution |
Europe at 60% |
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Key countries |
US, China, UK, France, and Germany |
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Competitive landscape |
Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks |
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Key companies profiled |
ABS Global Factoring AG, American Receivable, Bluevine Inc., CapitalPlus Construction Services, CG24 Group AG, Charter Capital Holdings LP, Deutsche Leasing AG, eCapital Corp., Eurobank Ergasias SA, Factor Funding Co., FirstRand Ltd, HSBC Holdings Plc, Mizuho Financial Group Inc., New Century Financial Inc., PMFBancorp, Riviera Finance of Texas Inc., Societe Generale SA, The Southern Banc Co. Inc., Triumph Business Capital, and Universal Funding Corp. |
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Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for the forecast period. |
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Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Type
7 Market Segmentation by Application
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
Research Framework
Technavio presents a detailed picture of the market by way of study, synthesis, and summation of data from multiple sources. The analysts have presented the various facets of the market with a particular focus on identifying the key industry influencers. The data thus presented is comprehensive, reliable, and the result of extensive research, both primary and secondary.
INFORMATION SOURCES
Primary sources
Secondary sources
DATA ANALYSIS
Data Synthesis
Data Validation
REPORT WRITING
Qualitative
Quantitative
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