“According to the company, with its help, small and medium – sized entrepreneurs can attract working capital online in a very short time – even within one business day – to stabilize cash flow.
Many Latvian companies are often hampered by late payments from customers, which do not allow them to pay their suppliers on time, pay salaries, buy stocks of goods, etc. The data available to Factris show that the average bill payment term for companies operating in Latvia is 52 days. Late payments are most often encountered by companies selling or renting construction, building materials and construction equipment, as well as companies engaged in wholesale or consulting activities.
In order to solve this problem, factoring is increasingly used in the world and also in Latvia, when the payment of debts is undertaken by the factoring company, financing the company’s working capital.
“Our observations show that fast access to low-cost working capital is especially important for companies during a pandemic, but such opportunities are very limited. In traditional credit institutions, bureaucratic requirements for obtaining financing are increasing, and banking competition in the market is reduced – bank branches are closed, personalized communication with bank customers is restricted, etc. Therefore, the new FAB platform helps small and medium-sized businesses about the work or services performed, settling accounts with suppliers, balancing cash flow and otherwise balancing the work, ”says Kaspars Barons, Managing Director of Factris in Latvia.
The new automated platform FAB provides an opportunity not only to apply for fast financing, ensuring an open, in-depth evaluation of all transactions, but also to easily manage the financed accounts. By joining the platform, the company has access to all information about its financial portfolio, its use, interest payments, customer payments and overdue invoices. The platform sends automatic e-mail notifications to the company’s debtors with a reminder to pay the bills, which allows the company not to think about customers’ late payments.
The new FAB platform has already gained recognition in the Netherlands and Lithuania and will be rolled out in other European Union countries.
Most factoring or invoice financing services in Latvia are currently used by wholesale, telecommunications and transport companies.
As Barons emphasizes, factoring is a good opportunity to develop business for small and medium-sized enterprises, for the financing of which there are currently relatively few competitive and efficient services in Latvia.
Using factoring, up to 90% of the invoice amount is received immediately, but the rest – after the customer pays the invoice. Factoring improves the company’s liquidity, balanced cash flow, eliminating risks to the business, Barons emphasizes.
Although the interest in factoring services in Latvia is growing, not all entrepreneurs in Latvia understand the benefits they provide and this segment still has great growth potential, Barons emphasizes.
According to the data federation of the European Union Factoring and Commercial Financial Sector, in 2018 the ratio of factoring to GDP in Latvia was 3%, while, for example, in Belgium and Cyprus – 17%, Estonia, France – 14, the Netherlands, the United Kingdom – 13, Lithuania – 8 %.