In the case of commercial finance a company transfers its invoices to KBC ComFin, in exchange for an advance that is always cheaper than other short-term financing arrangements. The system also works very well in the case of exports.
As a type of financing, commercial finance or factoring is particularly recommended if an exporter and its customer are in a permanent relationship. This might for example be because the customer consistently places new orders as his stocks run down. The permanent relationship creates room for a bond of trust, allowing the exporter to grant its customer payment terms of 60 or 90 days. ‘But this does create a financing problem for the exporter,’ says Dirk Van Strijthem, CEO of KBC Commercial Finance. ‘He has to finance not just the production process and his normal stocks but must also bridge the payment period. And that is precisely where KBC ComFin is able to step in.’
Factoring means that a company transfers its accounts receivable to KBC ComFin. ComFin will then immediately pay up to 90 percent of the countervalue as an advance. ‘We don't gamble,’ explains Van Strijthem. ‘Each invoice portfolio is subject to "dilution", namely the percentage which for all sorts of reasons is not paid: discounts, commercial disputes, debtors who are unable or unwilling to pay. Upon the commencement of a factoring contract we take account when determining the advance percentage of practices in that particular industry and of the corporate dynamic. If it turns out in the course of the contract that the dilution is higher or lower, the advance percentage can be reviewed. What is essential is that the portfolio must pay for itself. The advances we grant to our client must be automatically repaid because the debtors pay their invoices. In this way we do not therefore take any risk on the client itself.’
Apart from factoring various other solutions come under the heading of invoice discounting. Customisation is also possible. If the goal is just financing, the risk remains with the client, who then repays the advance if the debtor remains in default. KBC ComFin is also able to arrange credit insurance: in that case the client remains out of range if the debtor fails to pay. Bigger firms often take out insurance themselves, opening the way for ‘off balance invoice discounting’: the invoices then disappear from their balance sheet, which is of interest to those who attach particular value to good ratios. Medium-sized businesses often opt for pure financing.
A single discussion partner, a single system
‘How do we act differently from our competitors? We work with the European passport,’ Van Strijthem emphasises. ‘Specifically: if our client has a subsidiary in another EU country, we can also offer a solution for that subsidiary, even if we don't have a branch in that country ourselves.’ Competitors generally work for this purpose out of local branches in countries such as Italy, Germany or the UK. ‘Clients seeking factoring for their subsidiaries as well are then dependent on dialogue and interaction with each of those entities. With us they are able to do everything in one go: a single discussion partner and a single system, but always with respect for local legislation.’