Various KBC formulas for commercial finance help the carpet manufacturer Balta to keep its liquidity up to the required mark. But factoring is quite a process – in which the relationship manager plays a key role.
Balta manufactures three types of soft floorcoverings, mainly from synthetic materials: broadloom carpets, floor tiles and rugs. When it comes to carpets Balta is the market leader in Europe. It is one of the few carpet manufacturers that continues to produce in its own country: of the company's eight factories, six are located in Belgium, accounting for some 2 700 of the firm's 3 400 employees. For CEO Tom Debusschere the ‘secret’ behind the figures is very simple: automation and innovation. Transporting broadloom carpets is subject to limitations. Balta is able to market broadloom throughout Europe right up to Russia, and in the Middle East. Rugs and floor tiles can be transported more easily. The carpet manufacturer has customers in over 120 countries; 95 percent of the company's total production goes abroad.
Floorcoverings are a form of repeat business. In the retail trade the customers are furniture and interior design chains and specialist floorcovering or carpet shops, all of which place repeat orders.
Our relationship manager plays a key role: he always ensures that the right person is in the right place straight away.
A special feature of recurring customers is that they consistently have an outstanding debt; the previous order will not yet have been paid for when the next order is placed. Together with the substantial stocks that are required in order to serve customers worldwide, these deferred payments need to be financed, particularly if one wants to grant good customers 60 or 90 day payment terms.
‘KBC has two solutions that help us greatly regulate our liquidity levels,’ says Debusschere, ‘namely factoring and forfaiting.’ Both these formulas turn on advance financing: Balta transfers invoices to KBC, receiving on average 90 percent in return as an advance, at a rate of interest a good deal lower than that on an ordinary cash credit.
A typical feature of factoring – or commercial finance – is that Balta fully covers the debtor risk with credit insurance. This is a precondition for allowing payments in advance on the invoices; KBC is a co-beneficiary of the credit insurance policy. Claims on Russia and the Middle East remain outside the factoring story as there are no credit insurers in those countries. Thanks to efforts at KBC it will be possible for American clients to be added to the factoring contract in early 2017.
Thanks to the advance payment formulas we are able to fine-tune our liquidity.
In respect of a very big customer in the UK, Balta makes use of a different KBC solution, namely forfaiting. Debusschere explains how this differs from factoring. ‘In this case KBC accepts the credit risk itself. That is important for us, as we are dealing here with easily our biggest customer, apart from which the UK also represents somewhat more risk. Just think of Brexit, as well as the numerous fluctuations to which sterling has been subject. Under this formula the customer's bank no longer has any recourse to us, so that we can delete the invoices from our balance sheet.’
‘What we value enormously at KBC is the strength of the relationship manager,’ states Debusschere. ‘They ensure that we always have the right person in the right place straight away.’ Most of the minor problems arising in the day-to-day exchange of data between Balta and KBC are routinely resolved among back-office staff themselves. ‘The relationship manager is, however, on hand if required. At KBC we experience the quality of the people in an organisation that remains relatively lean; the emphasis is more on personal relationships.’ This means that apart from a focus on ratios and figures there is also room for new ideas and creativity. None of which in any way impedes efficiency: thanks to the pooling of resources at KBC and Balta, setting up the entire factoring operation, a few years ago, was completed in no more than two months. ‘Which can only be described as very fast.’
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