On the determinants of factoring as a financing choice: evidence from the UK

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Abstract This paper develops and tests hypotheses that explain the choice of factoring as a financing source and the type of businesses using it in the UK. The tests focus on establishing a profile of borrowers, based on firm’s demographic characteristics such as age, turnover, industry, and type of legal ownership. In addition to that we extend the analysis to test whether there exist any association between the use of factoring and the availability of credit to firms, the collateral requirements by banks and its value, the value of the firm’s debt, and also whether the business is experiencing financial difficulties. The analysis refers to a survey of 3805 companies of which 212 were using factoring services. We find evidence that each is an important determinant in firms’ choice of factoring as a source of finance for working capital and an instrument to cash-flow improvement but it is a financial option that is not universally available.
Original languageEnglish
Pages (from-to)239-252
Number of pages14
JournalJournal of Economics and Business
Volume54
Issue number2
DOIs
Publication statusPublished - Mar 2002

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Financing choices
Factoring
Financing
Financial options
Demographic characteristics
Cash flow
Debt
Credit
Working capital
Industry
Finance
Ownership
Turnover
Hypothesis test

Keywords

  • Factoring
  • Invoice financing
  • Working capital

Cite this

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title = "On the determinants of factoring as a financing choice: evidence from the UK",
abstract = "Abstract This paper develops and tests hypotheses that explain the choice of factoring as a financing source and the type of businesses using it in the UK. The tests focus on establishing a profile of borrowers, based on firm’s demographic characteristics such as age, turnover, industry, and type of legal ownership. In addition to that we extend the analysis to test whether there exist any association between the use of factoring and the availability of credit to firms, the collateral requirements by banks and its value, the value of the firm’s debt, and also whether the business is experiencing financial difficulties. The analysis refers to a survey of 3805 companies of which 212 were using factoring services. We find evidence that each is an important determinant in firms’ choice of factoring as a source of finance for working capital and an instrument to cash-flow improvement but it is a financial option that is not universally available.",
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On the determinants of factoring as a financing choice: evidence from the UK. / Soufani, Khaled.

In: Journal of Economics and Business, Vol. 54, No. 2, 03.2002, p. 239-252.

Research output: Contribution to journalArticleResearchpeer-review

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AB - Abstract This paper develops and tests hypotheses that explain the choice of factoring as a financing source and the type of businesses using it in the UK. The tests focus on establishing a profile of borrowers, based on firm’s demographic characteristics such as age, turnover, industry, and type of legal ownership. In addition to that we extend the analysis to test whether there exist any association between the use of factoring and the availability of credit to firms, the collateral requirements by banks and its value, the value of the firm’s debt, and also whether the business is experiencing financial difficulties. The analysis refers to a survey of 3805 companies of which 212 were using factoring services. We find evidence that each is an important determinant in firms’ choice of factoring as a source of finance for working capital and an instrument to cash-flow improvement but it is a financial option that is not universally available.

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