A crucial sector
Varischetti describes Factoring as a consolidated but still little known instrument, which translates into annual volumes (turnover) of 290 billion euros, equal to about 15% of the national GDP. At the European level, Italy contributes with the 12% of the factoring market, with a share of 8% worldwide. These data highlight the potential of this product, which represents a real opportunity for companies in any product sector.
However, Factoring is underutilized compared to other products, such as mortgages and traditional loans. Banks, which hold 90% of the market, do not actively promote Factoring, except to the bank’s established customers, although they have created dedicated divisions over the years. This situation leads to some underestimation of the opportunities that Factoring can offer. Italfinance strongly believes in this instrument, so much so that the division led by Varischetti reached a turnover of 580 million euros in 2023, with forecasts of exceeding 700 million in 2024 and reaching one billion in 2025. This success is due to the operating model of Factoring, which creates a virtuous circle: companies that obtain funding are encouraged to continue using this service, and to enhance it time and again. The key is the ability of Factoring to generate immediate liquidity, thus improving the financial health of companies, and on this aspect – according to Varischetti – adequate and specific training should be given to consultants, promoting a culture oriented towards service and the multiple ‘shades of grey’ that this instrument presents.
Advantages of Factoring and contracts advance payments for SMEs
First of all, factoring allows for an instant improvement in cash flow. Companies can advance the payment of invoices issued to customers, receiving immediate liquidity (remuneration), useful for dealing with operational expenses, investments and other financial needs, without having to wait for the commercially pre-established payment times.
Factoring then not only provides liquidity, but also offers protection against the risk of insolvency. Factoring companies, in fact, carry out a credit analysis of debtors, allowing SMEs to avoid losses arising from defaulted clients. Some Factoring contracts also provide for the possibility of insuring invoices (non-recourse), transferring the risk of insolvency to the factor, which in 90% of cases reinsures itself with leading Credit Insurance companies.
Thanks to this financial instrument, companies no longer have the burden of managing receivables and, therefore, payment collection, since it is the Factor that takes care of the collection, leaving SMEs free to focus on their core business and business growth, minimizing bureaucracy. Advancing contracts, in particular, offer an additional advantage: they allow the company to receive liquidity even before the invoice is issued, accelerating cash flow and fueling growth and purchase, for example, of raw materials or machinery. This is particularly useful for companies operating in sectors with long payment cycles, as it reduces the impact of late payments, in high demand among those executing /winning public contracts.
How can SMEs access to credit
Traditionally, access to credit for SMEs can be complex, requiring guarantees and detailed documentation. Factoring, on the other hand, is mainly based on the quality of the company’s production capacity and the strength of the customer portfolio, thus allowing those companies that cannot rely on financial guarantees to access liquidity.
As a result, with a more efficient management of the working capital, SMEs can better plan their growth strategies. Immediate liquidity allows enterprises to invest in new opportunities, such as acquiring new customers, expanding into new markets or launching new products, thus promoting sustainable growth. Finally, factoring can simplify business relationships, as suppliers can offer more advantageous payment terms to their customers, being able to rely on a fast and secure payment system, increasing customer satisfaction and loyalty.
Types of factoring and financial flexibility
The most common type is the non-recourse assignment, which guarantees the debtors’ solvency and facilitates credit management. Other variants include recourse assignments (without reinsurance), useful for the financing of working capital, and Factoring towards the Public Administration, which allows companies to obtain advances on receivables from public bodies, subject to a notarial deed. Finally, reverse Factoring offers financial flexibility to suppliers, allowing them to access additional credit lines and the company, as a debtor, to obtain a deferral on payment times and, in some cases, other advantageous economic conditions.
This range of possibilities allows companies to adapt the Factoring solution to their business model and financial needs.
Proposals to support Made in Italy
Taking into account the importance of micro and medium-small enterprises in the context of Made in Italy, Luca Varischetti has recently submitted a proposal to the Mimit for the implementation of a Reverse Factoring system, which helps companies overcome difficulties in accessing credit, also involving large companies. Not only his approach supports small businesses, it also promotes the stability of the entire supply chain.
Reverse Factoring could also be applied in relations with the Public Administration, in which many companies face payment delays. Varischetti suggests regulatory changes aimed at simplifying the recognition of credits by public bodies, making it easier for their suppliers to access financing.
Italfinance: a complete service, a bespoke approach
Italfinance, which employs a network of over 90 consultants throughout the country, with a stronger presence in the North East, is working to increase the percentage of its employees involved in Factoring, thanks to a model that combines specialization and support to offer companies an even more complete service. According to Varischetti, in fact, with greater awareness and a training-focused approach, Factoring can become a fundamental resource for Italian companies to face daily challenges with greater peace of mind and security, especially the small and medium-sized enterprises, which represent the heart of our country’s economy.
