European Markets

Bridging The Funding Gap In European Markets

17 March 2021

How has COVID-19 impacted demand for receivables finance in Europe, and what is its role in reigniting economic growth?

These are just some of the themes in EQ Riskfactor’s Receivables Finance Global Outlook 2021 report, titled Gearing up for Growth. It is the first of four reports to be published quarterly throughout 2021, with insights from leading industry decision makers and experts across the US, UK and European markets. Focusing specifically on European markets in this article, the prognosis is positive:

Continued demand

Despite the pandemic, demand for receivables finance in Europe has continued to increase, notably in the Netherlands (68%), France (52%) and Germany (48%). Differences between countries could be due to factors such as how governments have unrolled stimulus programmes, the portfolio of funding facilities available to businesses and the different market shares of invoice finance within that portfolio. The overall positive sentiment may partly be due to a continuation of an existing growth trajectory prior to and through 2020, and also market dynamics. For example, in the Dutch receivables finance market – the most bullish of the European countries surveyed – demand is more corporate-focused, and the corporate market was particularly strong. But the confidence of respondents also shows how receivables finance comes into its own during times of fluctuating sales as traditional lenders become more risk averse.

“This is mainly due to the receivables finance model which is based on two metrics – the value of a company’s outstanding receivables invoices and the payment history of its clients,” says Michael Ellis, Managing Director, EQ Riskfactor

With less approvals and faster access to funds, receivables finance has provided a low risk alterative to the traditional term loan during the pandemic – particularly for small-to-medium sized enterprises (SMEs) with growth potential.

Positive outlook

Looking forward to 2021, 60% of report respondents in Germany and France, and 80% in the Netherlands, forecast growth. This reflects the confidence in receivables finance as a vehicle for Europe’s economic recovery. The pandemic also presents new opportunities to onboard strong businesses that may not have previously considered receivables finance but need a credit solution for a short-term cash issue.

“By supporting businesses in short-term difficulties, you can get a long-term client that is utilising your facility maybe for growth purposes,” observes Michael Ellis.

It’s opening the door to new clients that are quickly discovering the benefits of receivables finance.

Moving forward from the pandemic, receivables finance remains best-placed as a vehicle for providing fast access to funds for growing businesses – something that has been clearly reflected by European respondents.

Read ‘Gearing Up For Growth’

The first EQ Riskfactor Receivables Finance Global Outlook report, Gearing up for Growth, provides fascinating insights for incumbent lenders and valuable decision points for businesses looking to fund their sustainable future growth in the post-COVID recovery. Each quarter, the report will explore different aspects of the study, revisiting views, opinions and analysis as we see how the impact of COVID-19 evolves over the coming months.

Read the report

We have detected that you are in United States. We think that Equiniti US would be more suited to deal with your needs.