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Created on 16.12.2019

Working capital management: factoring in Switzerland

Factoring is on the rise throughout Europe as an instrument in working capital management. As statistics show, factoring has been somewhat neglected in Switzerland. Here are some possible reasons for Swiss reluctance – and the arguments that show why it’s worth taking a look at factoring.

Factoring is a working capital management instrument that is gaining in popularity throughout Europe. However, as the following image shows, factoring leads a shadowy existence in Switzerland compared with the rest of the world.

Factoring market: a comparison of Switzerland and Europe

The graphic shows the development of the factoring market in Switzerland and Europe in 2010 and 2016. In 2010, it was at 4 billion euros in Switzerland, and nearly 1,000 billion euros in Europe. In 2016, it was at less than 4 billion euros in Switzerland and nearly 1,600 billion euros in Europe.
Source: Supply Chain Finance Lab, University of St. Gallen

This is particularly clear in comparison with Germany: in relation to gross domestic product, the use of factoring in Switzerland in 2015 was 50 times lower than in its larger neighbour.

Sales volumes from the factoring sector in Switzerland

The graphic shows the turnover volume of the factoring sector in Switzerland, which increased between 2004 and 2016 from around 1.3 billion euros to barely 4 billion euros.

Sales volumes from the factoring sector in Germany

The graphic shows the turnover volume of the factoring sector in Germany, which increased between 2004 and 2016 from around 50 billion euros to around 200 billion euros.

Low interest rates and the strong equity base of many companies in Switzerland explain this reticence towards factoring. There is also a fear that factoring will entail significant additional bureaucracy, or that factoring providers – depending on how they are structured – will go after their own customers. The rather negative image of factoring in Switzerland may also stem from this. 

Factoring – why it's worth considering this WCM instrument

The following arguments can be used to counter the concerns:

  • Even in a low interest rate environment, factoring provides the option of further reducing financing costs and simultaneously improving balance sheet figures
  • Using modern tools, there is practically no additional administrative workload
  • Your company can still continue to perform payment collection
  • During silent factoring, customers are not informed about factoring
  • Practically all large companies use supply chain finance instruments, and in many cases it is also useful for SMEs
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