Answers to your questions

Factoring

 

1. Is factoring developed in Europe?

Factoring is a means of financing that is developing dynamically in Europe, being the world's largest factoring market (excluding China). It is a very attractive alternative to bank lending, which generally has strict criteria for obtaining credit and may be less flexible.

2. To which types of companies is factoring adapted?

Factoring is a means of financing adapted to any type of company, in various sectors of activity, hence also the existence of various factoring products. There are solutions for SMEs (including start-ups) but also very large companies. For SMEs, it is above all a question of securing financing, reducing customer risk and optimising the management of debtors. Large companies often use it to diversify their sources of financing and optimize their balance sheet ratios through deconsolidating solutions.

3. What is important in the choice of factoring company?

Each factor has its own refinancing lines, product types and operating methods. It is always preferable to compare the different factor offers and analyse them in detail against a certain number of points, such as the simulation of the annual price, the duration of the contract, any limitations on financing, etc. It is always preferable to compare the various factor offers and analyse them in detail. Choosing the right partner is essential to sustaining the company's sound cash management.

4. Isn't factoring perceived negatively by the company's customers who decide to use it?

No, this is an outdated vision that is no longer relevant today. Many companies use factoring because it is a flexible and practical way to finance their growth or optimize working capital. In France, even CAC40 companies use factoring.

5. What are the costs of a factoring solution?

In principle, the factoring cost is composed of a factoring commission, which is a fixed percentage calculated on the amount of the financed invoices, and an interest rate p. a. which applies to the financing line. Ancillary costs may be added depending on the factor, hence the importance of a precise overall analysis.

6. How long does it take to set up a factoring contract?

Implementation of a factoring contract is usually very fast (1 to 3 weeks).

7. Is it necessary to entrust all debtors to the factor?

Only a limited number of debtors can be assigned to the factor or their entirety. It all depends on the structure of the company's customer portfolio and its needs.

8. Do I have to change the invoicing processes to make factoring?

No, factors do not require a change in the invoicing process. On the other hand, the sales invoice must be properly drawn up and the delivery (service) accepted by the customer, which is usually the case.

 

Credit insurance

 

1. Is credit insurance developed in Switzerland and Europe?

Credit insurance is particularly present in Western European countries such as Germany, France and the United Kingdom. This expansion has been accompanied by the development of payment facilities (credit sales) for buyers. In Switzerland, progress has been slower, but the implementation of this type of solution has intensified over the last 20 years, particularly under the impetus of banks (safety) and the establishment of European companies that very often use these solutions.

2. What types of companies are covered by credit insurance?

As soon as the company sells on credit, it takes a credit risk and may be eligible in most cases.

3. What is important in choosing a credit insurer?                          

Credit insurance is a very complex area, often on the fringes of other areas of insurance. Pricing and risk appetite (credit limits) are two important first criteria in the choice of insurer, but increasingly, contractual conditions, service level and the insurer's knowledge of the company's problems are taken into account.

4. If I sell to long-term customers or multinational companies, what is my interest in insuring credit?

Companies working with multinationals or long-standing customers often feel that they will never be affected by the risks of non-payment. The reality is often different. While the risk of non-payment with a multinational is lower (and the cost of insurance is affected by this), the consequences are dramatic, as they often lead to the disappearance of suppliers. As for long-time customers, a good track record does not necessarily mean they are favoured.

5. What are the costs of a credit insurance solution?

The cost of a credit insurance solution is a percentage (usually one per thousand) of the insured turnover. A minimum premium is guaranteed to the insurer and some ancillary costs (cost of information on credit limits) must also be taken into account.

6. How long does it take to set up a credit insurance policy?

The study of credit insurance solutions is the part that takes longer because it is often accompanied by a study of the company's clientele. As soon as the insurer is selected, the implementation is immediate. In total it takes 1 to 3 weeks.

7. Is it necessary to entrust the credit insurer with all its debtors?

It is above all a question of strategy. Assigning a limited number of debtors (or even only one) is equivalent for the insurer to practise a form of anti-selection, which will affect the final price. However, this strategy can be better adapted for the company.

8. Doesn't the credit insurer, if it is responsible for collection, run the risk of scaring my clients away?

Companies form privileged relationships with some of their customers that they would not like to see undermined by the intervention of an insurer following a delay in payment. Insurers are aware of this fact. They intervene in concert with the company and even during the collection phase, they do not lose sight of the fact that it is their money and they act accordingly.