Many finance directors at different U.K., French and German firms indicated that they intend to make more use of receivables-based financing, according to a study by Demica.
The report will be released at Information Management Network's ABS Global conference being held in London this week.
The findings showed that 40% of the firms that participated are seeking various non-traditional products including securitization, asset-based lending, factoring and supply chain finance.
According to the report, 42% of the 1500 finance directors surveyed said that the use of receivables-based financing has gone up over the previous years. Meanwhile, 43% of these companies intend to utilize this funding tool in the next year.
"There are more companies that finance the growth of their business through this type of financing as a result of banking relationships irrevocably changing with the financial crisis," Demica CEO Phillip Kerle said.
According to the survey, 59% of the firms said that the increased use of this type of financing is likely to be a longer-term change. Respondents are not viewing this as a short-term tactic, citing, as Kerle said, the permanent alteration of banking relationships.
As proof, Demica pointed to recent figures showing that banks might fail to meet about $2 trillion of the demand for credit origination globally without well functioning securitization markets. Because of the tightening in credit conditions, 37% of the respondents believe large firms will choose to raise money by utilizing a bigger portion of their receivables or payables.
In an interview with ASR, Kerle said that while the current regulatory uncertainty might prevent firms from using securitization, these companies could still rely on other receivables-based financing options such as asset-based lending. "This type of financing will not go away, even with the securitization markets shrinking," he said.
In fact, the study found that several European firms are interested in non-traditional funding sources including invoice-based financing. Specifically, U.K.-based and German companies indicated a keen interest in developing these techniques, maybe even matching France's current elevated use of this method of funding.
Demica's report titled The Growth of Receivabes-Based Finance aimed to find out the proportion of European firms that are already using funding techniques based on securing their trade receivables, the percentage that are intending to make further use of such methods, as well as to show the impact of current economic conditions on the utilization of trade receivable financing and bank offerings.
Demica provides specialized working capital solutions and consulting, advisory and technology services to multinational corporations.