Many SMEs/SMIs use factoring to finance their activities. Although constituting an opportunity for SME promoters, this mechanism hides certain contours that it manages to understand well.

  Factoring is the operation by which a company transfers by written agreement, with subrogatory effect, its receivables to the factor, who, for remuneration, pays him in advance all or part of the amount of the transferred receivables, while supporting or not, according to the agreement of the parties, the risks of possible insolvency on the assigned receivables. Alongside the financing, there is the management of the receivables, the monitoring of receipts and collection.

Speakers in the circuit:

The member: The company assigning the receivables;

The factor: The credit institution that usually carries out factoring operations;

The debtor: The customer of the member whose commercial debt is the subject of the factoring operation.

        In addition to the factor, other players intervene to facilitate the processing of factoring operations, including credit insurance organizations, insurance companies, etc.

Different types of factoring:

    Factoring without recourse: factoring agreement by which the member grants no guarantee to the factor against the insolvency of the debtor;

    Factoring with recourse: factoring agreement whereby the factor reserves the right to be reimbursed by the member, in the event of the debtor's insolvency;

    Confidential factoring: the client of the member is not notified of the existence of a factoring contract;

    Reverse factoring: The factor pays a company's suppliers directly;

    Import or export factoring concerns a debt whose debtor or member is outside the country.

Etc...

Benefits for SMEs:

     Reducing the risk of non-payment: the factor can take charge of the follow-up and collection of non-payments in the event of the insolvency of your customers;

    The speed of financing: Rapid availability of funds (on average 24 to 48 hours, depending on the factor) and the company does not need to wait for the due date of a customer invoice to have funds;

   Optimization of cash management: flexible and reactive solution to have cash to meet commitments such as payment of salaries and suppliers;

   A better assessment of customer risk: At the start of the factoring contract, an assessment of your customers is made by the factor. This allows you to get a better understanding of your customers.

   Reduction of administrative costs: By delegating the receivables to the factoring company, you achieve an economy of scale, you reduce financial costs, you lower insurance costs, and you reduce personnel costs. In addition, you replace part of the fixed costs with variable costs. So you can focus on your customers, the smooth running and development of your business.

Situation of factoring worldwide:

  In 2015, more than 2,373 billion euros in factoring transactions worldwide. Africa represents only 0.7%. About 2500 factoring companies exist. In terms of world market share, Great Britain, China and France, it is more than 30%. In the following countries: Great Britain, France, Italy, Spain, Belgium, it is more than 10% of their GDP.

  In terms of factoring issues, a study conducted by the WTO shows that a 10% increase in factoring operations leads to a 1% increase in real commercial movements. Also, the loss rate on factoring is very low.

  Factoring can concern import or export transactions involving the exporter, an export factor, an import factor and the importer.

  In comparison with other forms of international financing, international factoring is well ahead of credit insurance (8.6%) and documentary credit (2.2%).

Situation of factoring in Cameroon

  In 2014, a law N° 2014/006 of 23/04/2014 governing factoring activity in Cameroon was promulgated and the implementing decree N° 2016/0435 PM was signed on March 11, 2016. Cameroon is one of the few in Africa to have factoring regulations.

  The perception by SMEs of high prices is one of the obstacles to the development of this product. However, factoring is a set of services that accompanies financing. The use of factoring strengthens the power of SMEs, which do not have the ability to put pressure on major clients.

  Factoring transactions amount to XAF 20 billion distributed between 03 main players.

  Among the actions that could contribute to the development of factoring in Cameroon, there are: the intensive promotion of factoring among the public, the extension of factoring to public entities (countries such as Italy and Portugal are pioneers), the appropriation of current regulations, including the implementing decree recently made public by all stakeholders,…

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