Bulgarian factoring market to grew up by 40% annually

The first factoring company in Bulgaria – UniCredit Factoring reports turnover which exceeds BGN 400 mln for year 2006. The company expects its turnover to reach almost BGN 600 mln as of the ned-2007. In such way UniCredit factoring proves as the most powerful factoring institution in Bulgaria.

„Actually from now on Bulgaria’s factoring market will start to develop. Right after the establishment of UniCredit Factoring, other factoring companies were constituted. However I expect new players to penetrate the local market too.” Philip Genov, executive director of UniCredit Factoring Bulgaria comments.

Factoring – the effective solution for increasing inter-company indebtedness

During the last few years, factoring market in CEE shows annual growth of between 20% and 40% depending on the country, according to data presented by UniCredit Group. It is expected the above mentioned growth to remain the same in the next few years. Concerning Bulgaria it will exceed 35% for 2007, while for next years will range at 40% annually.

„Bulgarian economy has a significant advantage developing local factoring market. Factoring services is the effective solution for the increasing inter-company indebtedness” Genov says. Delayed payments in Bulgaria are with average term of 57 days, according to observations of UniCredit Factoring. Thus if a company uses factoring during this period of time then it could work with fresh money in order to produce more and then to raise sales and profit. “This is the way how factoring works for decreasing company’s indebtedness and for increasing Bulgaria’s GDP” Genov adds.

Advantages of factoring

„One of the main advantages of factoring as an alternative to bank loans is more simplified procedures and relatively lower cost. Another advantage is that such financing does not need to be collaterized. In comparison to the traditional loan, factoring is not recorded as a debt in the company’s balance sheet, respectively such company does not possess debts which have to liquidate” Genov said. According to him factoring is one effective choice for manufacturers, trade companies or companies working in the field of services which perform regular deliveries under the condition of open accounts issuing invoices for their sales. UniCredit Factoring offers internal factoring, which means that both buyer and seller should be positioned in Bulgaria.

The main benefits of using factoring for Vendor Company are: access to financial resources with better conditions in comparison to classic financing, optimization of cash flows, outsourcing of all activities related to collection and administration of takings, higher liquidity as well as improvement of turnover capital etc. Buyer Company or the debtor receives better conditions for future payments and opportunity for establishing credit history.

Curious facts in relation to factoring

In its initial form, the idea for such service which we call now factoring aroused during the rule of king Hamurapi. During his rule was established one of the first scripts and one of the most ancient preserved state statutes and business etiquette, known as the Hamourabi’s Code. They were engraved in a stone and for this reason were considered unchangeable.