Credit Suisse Launches Factoring for Businesses
Alternative form of financing offers clear benefits for corporate clients.
Zurich.-Credit Suisse is now offering a new form of financing for corporate clients based in Switzerland. Factoring is designed to meet the growing need of SMEs and larger companies for a financing model that is more closely aligned to their volume of sales. Under factoring, cash flow increases in line with turnover, thus allowing for the targeted acceleration of business growth while ensuring a company’s ability to pay. In addition, factoring can help companies to better manage their accounts receivable and cash flow, improve creditworthiness, and protect against non-payment in Switzerland and abroad. Factoring services from Credit Suisse are available for companies that engage in business-to-business sales with a solid and diversified client base. In addition, those companies must generate annual sales of at least
CHF 1 million at present or in the near future.
The factoring market in Switzerland has grown by an average of 30 percent p.a. in recent years. However, the market penetration of approximately one percent of gross domestic product (GDP) is very low compared to other European countries. The growth prospects in this area of business, as well as the frequent demand for these services among clients, convinced
Credit Suisse to enter the factoring market. Since it involves less risk than a conventionally financed loan, factoring is an attractive alternative to regular working capital finance, especially for clients with a low credit rating.
More Freedom for Businesses
In a factoring relationship, Credit Suisse (the factor) purchases accounts receivable from the factoring clients on an ongoing basis. Different types of factoring products are available from Credit Suisse. Under in-house factoring, debtor positions are purchased and protected 100 percent against default. Under the more comprehensive full-service factoring service, the entire accounts receivable management of the company is outsourced to the factor. With factoring, the company receives 80 to 90 percent of the invoice amount, and the factor retains 10 to 20 percent. The remaining amount is credited to the factoring client once the debtor makes its payment. This can provide companies with the financial freedom to fully utilize supplier accounts or generally reduce short-term debt. By purchasing the accounts receivable, in what is known as a true sale, Credit Suisse can also usually help to improve a company’s creditworthiness in the medium term. The additional cash flow typically helps reduce debt and lowers total assets, which has a positive effect on key figures such as the equity ratio.
When building relationships with clients in new markets or segments, it can be very time-consuming to monitor foreign debtors and collect accounts receivable in addition to issuing payment reminders. Under full-service factoring, Credit Suisse handles these activities for the factoring client, enabling the business to focus on its core activities.
Dedicated Credit Suisse Factoring Finance Center
Credit Suisse has established a separate Factoring Finance Center to handle its factoring business. Clients can access their factoring accounts via an internet portal (Factoring Net), and make payments, generate reports or send electronic invoice information.
Costs for factoring are based on the client’s specific needs and the range of services provided by the factor. There are two different cost components: interest and the factoring commission. The factoring interest rate is based on the 1-month LIBOR and an individual margin. The fee for the transaction covers accounts receivable management (for full-service factoring only) and the defrayal of debtor default risk.
Factoring Is Suitable for a Wide Range of Industries
Factoring services from Credit Suisse are available for companies in a wide range of industries. The main requirements are that the company is based in Switzerland and is active in business-to-business sales. Companies operating in sectors such as wholesale trade, manufacturing or services with a solid and diversified client base are particularly good candidates for factoring. Their annual sales should also total at least CHF 1 million.
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