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An innovative two-
day seminar in Kiev brought together the regulator (National Bank of Ukraine), the world’s largest factoring association, FCI, and EBRD partner banks
in Ukraine
In February 2018 the TFP team organised two days of training and panel discussions among key trade finance players and was the first training jointly funded by the NBU, FCI and EBRD. Many aspects of factoring were discussed, and we summarise them below.
FACTORING IS ON THE UP
First, factoring continues to grow in both mature and emerging markets. Through their control methods
and permanent monitoring of the receivables on their clients’ debtors, factoring companies or factoring divisions of banks are able to provide more financing than traditional lenders, and at the same time limit their credit risks to a strict minimum.
Factoring could become very useful for small and medium-sized enterprises (SMEs) and larger companies alike; it could be a good way to mitigate risks (risk protection) or to increase cash flows and “outsource” labour-
intensive administration (including debt collection).
It may also be particularly attractive in financial systems
with weak commercial laws and enforcement. As with traditional forms of commercial lending, factoring provides SMEs with working capital financing. But unlike traditional forms of such financing, factoring involves the outright purchase of the accounts receivable by the factor, rather than the collateralisation of a loan.
It is also quite distinct from traditional forms of commercial lending where credit is primarily underwritten based on the creditworthiness of the seller rather than the value of the seller’s underlying assets.
In a traditional lending relationship, the lender looks to collateral only as a secondary source of repayment. The primary source of repayment is the seller itself and its viability as an ongoing entity.
LONG-TERM PLANS FOR SHORT-TERM
TRADE FINANCE
IN UKRAINE