Understanding factoring and regulating it with no penalty for business growth

In 2024, factoring in Italy generated nearly €300 billion in turnover (the annual flow of receivables assigned to the factoring company), equal to 13% of GDP. Without factoring, the production system would lose between 3% and 4% of GDP, up to €78 billion in value added. Factoring is therefore a true liquidity infrastructure, capable of supporting more than €200 billion in working capital every year.

The study Valore, competitività e rischio del factoring. Il ruolo della regolamentazione (Value, competitiveness and risk of factoring. The role of regulation, in Italian) conducted for Assifact, shows that factoring, in addition to being an alternative to bank credit, is also a structural mechanism for stabilizing supply chains, particularly crucial for SMEs and for companies supplying the Public Administration. It also highlights a critical issue: the current European regulatory framework risks overestimating its risk, thereby constraining its ability to support the real economy.

The functions of factoring

Factoring is often perceived as a technique for monetizing receivables. In fact, it combines working capital financing, professional credit management and, in the case of non-recourse factoring (where the credit risk remains with the factor), risk coverage. In a country like Italy, where trade credit accounts for a very large share of companies’ current liabilities and payment times are still long (over 80 days in B2B and more than 120 days toward the Public Administration), the issue becomes systemic.

The literature recognizes factoring as playing an important role in facilitating SMEs’ access to credit in the presence of bank rationing; supporting internationalization; reducing information asymmetries along supply chains; and acting as a buffer during crises. The research for Assifact provides an integrated measurement of its macroeconomic impact and, above all, a critical assessment of the consistency between the sector’s actual risk and its European regulatory treatment.

The questions underlying the study are therefore three:

• How much economic value and liquidity does factoring actually generate for the Italian production system?
• Is the sector’s risk profile consistent with its regulatory representation?
• Does the current European prudential framework favor or hinder the development of an instrument that has proven to be countercyclical and resilient?

Oxygen for 32,000 companies

The research, conducted by a group of professors and researchers from SDA Bocconi, integrates theoretical analysis, market data, international comparison and quantitative simulations.

In 2024, the global factoring market reached €3.9 trillion in turnover, 67% of which in Europe. Italy ranks fourth in Europe with €298.5 billion, equal to about 13% of Italian GDP. The number of client companies was 32,431, 42% of which had revenues below €10 million.

The sector generates more than €200 billion in liquidity per year. Through a counterfactual simulation, the researchers estimate that, in the absence of factoring:

• Between €20 and €30 billion in immediate financing needs would remain uncovered.
• Companies’ net working capital would increase by €35–42 billion.
• The loss of value added would range between €64 and €78 billion, equal to 3–4% of GDP.

Risk profile and regulation

The comparative analysis for 2015–2024 shows that factoring records a higher and more stable average ROE than the banking system; a structurally lower cost-income ratio; and a significantly lower and less volatile share of non-performing exposures.

In 2024, nearly 98% of receivables were performing. Moreover, 81% of turnover was non-recourse, with risk absorbed by the factor.

The sector therefore demonstrates a structurally contained risk profile and countercyclical resilience, confirmed during the 2008 financial crisis and the pandemic.

The critical issue emerges in relation to the definition of default applied to exposures toward the Public Administration. The automatic 180-day threshold means that technical-administrative delays are classified as credit deterioration. This results in an artificial increase in risk-weighted assets, higher capital absorption and an estimated loss of lending capacity of around €2 billion.

This represents a misalignment between actual economic risk and regulatory risk, penalizing in particular portfolios toward the Public Administration, where the risk of insolvency is structurally very low but delays are frequent for procedural reasons.

Rules and specificities

The research findings raise the issue of regulatory proportionality. Treating factoring as traditional bank lending, without recognizing its operational specificities and different risk profile, could constrain a crucial infrastructure for supply chain liquidity, reduce the financing capacity of companies already exposed to structural delays and generate macroeconomic costs not justified in terms of stability.

In a Europe seeking simplification and competitiveness, the regulation of factoring can be either an enabling factor or a constraint. The figures show that, when it works, factoring finances receivables, growth, stability and GDP.

Paola Schwizer, Filippo Annunziata, Gennaro De Novellis, con la collaborazione di Thomaz Braga de Arruda, Marcello Degni, Francesco Bianchi. Valore, competitività e rischio del factoring. Il ruolo della regolamentazione.

The conclusions of the study form the basis of a Response to Consultation on “Draft guidelines amending Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013,” prepared by the three authors and Giampaolo Gabbi following a request from the European Banking Authority.