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Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
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Financing a Livable World
11-2-2020 | by Aastha Tomar
If Greta Thunberg doesn’t inspire us, breathing some Delhi air may. While these might have been in news recently, more of this discussion is on social media rather than real action.
Sustainability has thus mostly been associated with activist connotation and, less with real, on-ground impact.
As we evaluate on-ground actions, investments towards such actions become first step and these need to make “financial sense” for investors to flock in. That’s when, I believe, that traditional financial acumen fails us. The foundational elements of investment rationale shall make such investment difficult. Let’s evaluate how –
Of all, these foundation elements make investment capability of capital markets to adapt in disruptive situations, like we are facing now for climate change, difficult. Financial markets, in its prevailing methods, would only consider climate change once its impacts are visible, but that, I guess, would be too late.
Having worked in Debt capital markets (DCM) my first reaction was to search of how DCM is contributing in sustainability and this led me to know about a beautiful concept of green bonds. The bond by their very name “green bonds” click into mind that there is something related to sustainability in it.
Green bond principles, intended to provide a framework for debt funding for projects which shall contribute to sustainability, is a step in the right direction. It has been framed with four core pivotal elements –
It’s the use of proceeds which sets apart green bonds from regular bond issues. The eligible projects for such issuance should be from around ten categories including renewable energy, energy efficiency, pollution prevention and control, green buildings etc.
A cumulative $580 billion of green bonds were sold through 2018, according to Bloomberg New Energy Finance. According to climate bond initiative in quarter 3 of 2019 itself USD 6.2 bn worth green bonds were issued worldwide, which is 87% up YoY. There were 139 issuers from 32 countries. There are many issuers joining the race and many nations as well. European nations being the ones taking the lead.
Though figures for green bonds may seem encouraging when we see them standalone but when compared to the global bond markets which are more than USD 100 trillion market, green bond market is hardly a fraction of it. Europe alone needs about 180 billion euros ($203 billion) of additional investment a year to achieve 2030 emission targets set by the European Union in the 2015 Paris Agreement on climate change.
In nutshell, green finance initiatives are steps in right direction but need more muscle and speed to enable actions on ground.
What are your thoughts?
FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability
Factoring – Unlocking the (hidden) potential of your working capital
31-1-2020 | by Ron Wessels
Do you also wait for your customers to pay you after a sale is closed? In today’s world it is getting more difficult to arrange cost efficient traditional bank financing and not everybody has sufficient cash reserves. If funding for you is tight, you can search for alternatives. Many suppliers of alternative funding are quite expensive and their business ethics are not always solid. Perhaps your working capital offers a better solution.
There is a way to convert your outstanding debtors into cash. This is called “Factoring”, offered by factoring companies.
How does Factoring work?
Depending on your existing AR (accounts receivable) portfolio an arrangement with a specialist factor provider can be made to sell those invoices on the date your issue them and get paid within a couple of days (mostly 2-3 days).
You receive most of the cash upfront but yet you are still in charge of the collection process and dunning (there are factoring companies that also offer credit collection services). You want to stay in control of the collection side as this is very important for your Customer Relation, e.g. you want to know if things are not going as they should be. You do not want to outsource the management of potential conflicts with your important clients. Your customers will pay into a bank account in your name but under custody of the factor provider. Obviously, you will have/need full insight on the activities on this bank account. Typically, you get funded about 90% of the face value of the invoice (ex.VAT) and the remainder minus costs, upon collection from the customer. The costs for factoring are depending on the size of your AR portfolio sold but vary around 1,5 to 4%, depending on aforementioned size (this is an estimate and have to be explored during an evaluation). This cost includes the credit insurance.
The factoring program can be tailored either on-balance or off-balance to optimize your accounting processes and your balance sheet strength. Factoring most of the times also requires a credit insurance for the outstanding accounts receivables. Both you as well as the factoring company want to mitigate the risk of clients who cannot pay.
Why is Factoring interesting?
Often factoring, including a credit insurance, is cheaper than traditional bank financing. Especially for companies with no or low credit rating. The factoring industry is more mature than many of the suppliers of alternative funding. This results in more stable processes and improvement of existing processes. Last but not least, the build-up of your balance sheet will be different resulting, amongst others, better financial ratios.
Is factoring difficult to implement?
Not necessarily, you need to agree on the terms and conditions with the factor, the credit insurance and it involves some legal advice/work. Furthermore, you need to agree with the factor on how to deliver the AR data (preferable automated) and the frequency of submission. As this is a mature industry, it is relatively easy to compare quotes of different factoring companies. Two further aspects are very relevant. The first is the quality of your existing processes. If your AR is a bit chaotic, it will be harder to implement the factoring services. Furthermore, the size and activity of your company is important. Small companies with a low number of deals will be treated differently by a factoring company. For example, a mobile telephone operator.
Conclusion
Factoring is a good alternative for traditional bank debt to finance your working capital. It will require up front work but once installed it is easy to maintain at a low cost. A quick scan of your existing AR outstanding can prove whether it is cost efficient to enter such program.
If you are looking for independent advice on factoring before reaching out to suppliers, please contact us. We are happy to help you.
Ron Wessels
Group Treasurer
European Parliament backs Withdrawal Agreement
| 30-1-2020 | treasuryXL | XE |
Following a debate in Brussels yesterday evening, The European Parliament backed the Brexit Withdrawal Agreement put forward by Boris Johnson. This was approved with by staggering 621 votes in favour, with 49 against. A major milestone in the Brexit agreement which was somewhat already expected, following news last week that it cleared the committee stage. This bodes well for the UK to leave 11pm Friday evening. Following this result, the debate did become slightly emotional with Farage taking his chance to rub it in the face of the European politicians, triggering Parliament’s Vice-President Mairead McGuiness to turn off his microphone stating ‘put your (Union Jack) flags away, you are leaving.’ Not everyone was so cold with the likes of Ursula von der Leyen stating that the British MPs ‘wit, stubbornness and charm’ will be missed.
In terms of UK data, Mark Carney will announce whether or not the UK will cut its interest rate. A decision which has left markets unsure on which way it’s going to go, with a 50-50 split between raising and dropping rates. This will be Carney’s final rate decision and will be sure to affect the markets. The Quarterly Inflation Report is also due out and may be the deciding factor on the rate cut which the markets will be looking out for come 12:00 GMT.
US
The FED decided to leave interest rates unchanged at the much expected range of 1.5% – 1.75% leaving a rather muted market reaction. Other US Data out today is Gross Domestic Product figures which comes out at 13:30 today with a consensus at 2.1%, the same at the previous quarter. In other news, the Greenback has continued to benefit as a safe-haven currency with the uncertainty surrounding the Cornovirus.
At the time of writing:
GBPUSD – Trading above 1.29 at 1.2994
GBPEUR- Trading above 1.1 at 1.1792
EURUSD- Trading above 1.10 at 1.1018
The figures are based on the live mid-market rate, correct as of 08:30 GMT on 30/01/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.
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