Why and How Does a Supplier Choose Factoring Finance?

Abstract

Suppliers offering trade credit to the downstream retailers have to face many problems, such as receivables management, capital occupancy, and buyer’s credit risk. Many of them choose factoring finance to solve those problems simultaneously. This paper develops several supply chain decision models to show the benefits a supplier can obtain from the main functions of factoring and how he should choose between recourse factoring and nonrecourse factoring. In particular, we identify the conditions on which factoring may bring benefits (including financial benefit, guarantee benefit, and receivables management benefit) to the supplier. The supplier’s choice between recourse and nonrecourse factoring relies on his risk attitude. Given that the supplier is risk-neutral and the factoring fees are acceptable, recourse factoring is preferred when the factoring finance ratio is relatively high; otherwise, nonrecourse factoring is preferred. However, if the supplier is risk-averse, his preference for the two factoring schemes under different finance ratios may change when the risk constraints become stricter. If the target profit is lower than a certain level, the supplier’s financial choice will switch from recourse factoring to nonrecourse factoring in the case finance ratio is relatively low; otherwise, his financial choice switches from nonrecourse factoring to recourse factoring in the case finance ratio is relatively high.

Core-Firm Financial Structure on Reverse Factoring with Machine Learning Models

“…Regarding the inner motivation, Soufani [9] reveals that the younger and smaller UK firms were more willing to adopt factoring as a financing source. Tian et al [10] find that suppliers' attitudes towards risks determine their preferences for different factorings. In light of resource dependence theory (RDT), Liu et al [2] investigate the determinants (e.g., customer concentration) of Chinese companies to explore the balance between the suppliers and the customers, which sheds light on the relation between the customer features and factoring.…”

“…Xu et al [8] publish their systemic literature review with a bibliometric study. The impact of reverse factoring on the firms has also been discussed [5,10]. However, the ambiguity of financial structure affects the usage of reverse factoring.…”

Crisis de liquidez del COVID-19

“…Así, estos bloques recogen los determinantes relacionados con la puesta en marcha del programa (por ejemplo, las condiciones de pago, las tasas de interés o la liquidez) ( Van der Vliet et al, 2015;Grüter y Wuttke, 2017;Lekkakos y Serrano, 2016;, la implementación (Liebl et al, 2016) y el análisis de crédito y riesgo (por ejemplo, el perfil crediticio del comprador) (Dello Iacono et al, 2015). Un cuarto bloque recoge los determinantes relacionados con las operaciones y la tecnología (por ejemplo, los requisitos previos y la facilidad operativa) (Tian et al, 2020). Un quinto bloque considera los aspectos de cooperación, donde están presentes aspectos como la confianza, la transparencia y la colaboración en las relaciones comprador-fabricante (Dello Iacono et al, 2015;Liebl et al, 2016;Lampón et al, 2021).…”

“…Este nuevo contexto exige soluciones de financiamiento innovadoras y nuevas tecnologías, que tengan el poder de apoyar a los proveedores en una amplia gama de circunstancias y a lo largo de todo el proceso de pagos, al tiempo que ayuden a mejorar la eficiencia, la visibilidad y el control tanto para los compradores como para los proveedores (Pakcan y Latif-Schmitt, 2020). Las instituciones financieras (IF) trabajan constantemente en productos innovadores dirigidos a las pymes, algunos de los cuales pueden encontrarse en el ámbito del financiamiento a cadenas productivas (SCF, por sus siglas en inglés) (Gomm, 2010;Wuttke et al, 2013;Ali et al, 2020) y productos relacionados como el factoraje inverso (FI) (Gelsomino et al, 2016, Tian et al, 2020. Aunque la literatura sugiere que el FI mejora el desempeño de las cadenas de suministro al facilitar el acceso a la liquidez de los proveedores (Tanrisever et al 2012;Grüter y Wuttke, 2017), en la práctica, el proceso de adopción es complejo y lento .…”