INCREASED USE OF FACTORING

As a result of the COVID-19 epidemic many small and medium enterprises (SMEs) in North Macedonia now face reduced liquidity, reduced profitability, and reduced turnover of claims.  This reduces the capital of the SMEs, which could threaten their survival on the market.  Factoring can provide a liquidity lifeline and improve the chances of market survival.  Factoring allows businesses to access the capital or money they are owed for completed sales or services but for which they have not yet been paid. 

Multihem, a midsized company that produces cleaning products, benefited from factoring.  Before using factoring, Multihem tried to negotiate with their clients with deferred payments of 30 days or more; however, the problems only grew when payments were outstanding even later, exceeding 60 days.  Multihem’s General Manager, Mile Milanovic, stated, “Pursuing payments over long periods of time puts pressure on our cash flow and reduces our ability to procure needed supplies.”

In search of a solution for their problem, Multihem met with a consultant provided by the Faktor Trust with USAID’s support.  Mr. Milanovic happily noted that the consultant explained how factoring works, what are the associated costs, and which financial institutions offer factoring products.  Mr. Milanovic said, “Most importantly, the consultant explained the most suitable solution for our needs and helped us with the application process.”  USAID’s support to the Faktor Trust supports SMEs to access factoring as a financial solution by assisting them to successfully submit factoring applications and communicate with factoring financial institutions.

Multihem had an increase in demand for their products during the COVID-19 pandemic.  After meeting with Faktor Trust’s consultants, Multihem was able to apply factoring as a financial solution.  Mr. Milanovic noted that factoring has helped them to shorten the payment and production cycle by as much as two to three times.

With USAID’s support, Multihem is just one of many companies now using factoring as an alternative source of financing, enabling them to be successful during the COVID 19 pandemic.  

USAID works with financial service providers and consultants to support SMEs to increase their financial management knowledge, through targeted, one-on-one support to individual companies on factoring.  This has increased the use of factoring as a tool to increase liquidity. To date, USAID has partnered with the Faktor Trust to support 164 SMEs with factoring applications and generate $3,400,829 in funding for SMEs to sustain their operations.