SFNet Survey Finds Total Factoring Volume Fell 8% in 2018-2019 Period

According to the Secured Finance Network’s 2019 Secured Finance Market Sizing & Impact Study, the factoring industry saw only minor changes in the 2018-2019 time period, except for a significant increase in credit losses, most likely attributable to the competitive environment through 2019. Long-term benign credit conditions and very liquid capital markets, combined with a slowdown in economic growth, set the stage for an increase in losses and decreased profitability.

Although the survey’s comparison of factoring activity between 2018 and 2019 is valuable, ongoing impacts of the COVID-19 pandemic are likely to overshadow the significance of data the survey revealed.

“Receivables factoring is an ‘all seasons competitor’ in the world of finance,” Terry Keating, president and CEO of Accord Financial and member of SFNet’s advocacy committee, said. “It has been around for hundreds, if not thousands, of years, and so I am confident that factoring, like our economy, will weather the current stormy global conditions. In fact, it is more likely that the industry will grow and thrive during this time of stress and uncertainty.”

Only comparatively minor changes occurred within the factoring industry between 2018 and 2019, according to the survey. Total factoring volume fell 8% in 2019 from 2018, with reductions in both domestic (7.6%) and international (11.3%) volumes, a decline likely attributable to competitive conditions and a generally favorable economic landscape. The disproportionate reduction in international factoring is most likely tied to changes in trade flows related to the tariff/trade war that was being waged throughout 2019.

Geographically, U.S. factoring volume shifted away from the west, southwest and midwest, with significant increases in the northeast and southeast. The industries served by factoring grew slightly more diverse as declines observed in every traditional industry were offset by a significant increase in the “other” category. This may point to a greater acceptance of factoring across a broader range of industries.

Factoring revenue was up slightly, with a small increase in revenue as percentage of volume, indicating stable and perhaps moderately increased yields. The mix of revenue showed some changes, with a decline in interest income offset by increased service fee and other income. This may point to factors being more cognizant of how they “package” their deals. Staffing by factors was down by just 2.2% in 2019 from 2018.

The survey was conducted for SFNet by Westat, an independent market research firm. Seven factoring companies participated.