LONDON--(BUSINESS WIRE)--The increased use of accounts receivable (AR) finance by SMEs in the EU’s four biggest economies; Germany, France, the UK and Italy, could provide the additional funding and working capital finance to facilitate the creation of almost one million new jobs by 2020, according to an in-depth econometric report commissioned by GE Capital.
The increased flexibility and improved cash flow benefits offered by AR finance could also provide a much needed boost to the four economies with, boosting German and French GDP by 2.90% and 2.79% respectively. Italy could see the biggest growth from increased AR, with Italian GDP potentially growing by 3.57%, or €12.17 billion a quarter by Q4 2020. In total, “optimal” uptake of AR across these four markets could add €52.9 billion per quarter to GDP across the four economies.
The report, which combines detailed econometric modeling and interviews with more than 70 key stakeholders and users across Europe, examines the current and future economic impact of AR finance across the UK, France, Germany and Italy.
As well as the positive impact of expanded use, the study also examines how reliant these economies are on existing AR finance. According to the report’s findings, more than 250,000 jobs in the UK are currently reliant on the existence of AR finance, with just over 600,000 jobs being reliant on AR across the four economies. Additionally, the withdrawal of AR finance from the economy today would lead to an immediate contraction of the four economies by €16.92 billion in Q4 2011.
Isabel Fernandez, Chief Commercial Officer of GE Capital EMEA said, “In 2010, almost €1 trillion of working capital was provided to European SMEs and mid-market firms through AR finance. It is important piece of the SME funding landscape and it is clear that, with greater awareness and usage, AR could be an even more important source of finance for growth for European companies.”
GE Capital is one of the leading providers of AR finance in Europe lending more than €250 million to small and medium sized European businesses every working day and financing more than 500,000 companies every year in Europe alone. Since 2004, GE Capital has provided more than €350 billion of working capital to small and medium sized businesses across Europe.
For the full report, please visit: http://www.gecapital.eu/en/arfactor/index.html
NOTES TO EDITORS
GE Capital commissioned SQW, a leading independent economic research agency working for public, private and not-for-profit organisations to undertake the research. For further information on approach, methodology and economic modelling undertaken can be found in the full report at: [Insert URL].
Accounts Receivable (AR) financing occurs where a receivable (typically an invoice) forms the basis for a credit transaction. Whereas under a typical bank loan a financial institution will offer a loan to a business based on their credit worthiness (with interest charged and the bank holds the assets of the debtor as collateral in the event of non-payment), the use of AR differs in that money is not loaned. Instead the business sells a receivable (and therefore a real and tangible financial asset) in order to raise capital and enhance cashflow.1
There are several different types of AR, but the ones commonly used are Factoring and Invoice Discounting.
About GE Capital
GE Capital is a leading provider of specialist finance throughout the EMEA region, providing a wide range of solutions including: accounts receivable management, inventory finance, ABL, cross-border financing, leveraged finance, European leasing/vendor finance and fleet management. GE Capital focuses on sectors where it can share GE's 130+ year heritage with customers - energy, healthcare, media, transportation and industrial - and has a major footprint in EMEA, including an exciting $8 billion commercial finance joint venture with Mubadala in Abu Dhabi.
About SQW Consulting
SQW is a leading independent economic research agency working for public, private and not-for-profit organisations to undertake the research. Previous published work includes economic and sustainable development research projects for clients including HM Treasury, Department for Education, Department for Culture, Media and Sport, Department for Business and Innovation and Skills, UK Trade and Investment.
1 Unlike a bank loan, three parties are involved in an AR transaction: the factor (the organisation buying the receivable), the customer (the organisation paying the invoice), and the debtor.