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Thursday, 29 March 2018

EFG Hermes receives green light to launch factoring business, plans to bring it online by 3Q2018

EFG Hermes has received regulatory approval to offer factoring services in the Egyptian market this year. The company announced yesterday (pdf) that its new business unit, EFG Hermes Factoring, now has a license to begin offering “tailor-fit factoring packages that cater to the needs of large-cap corporations as well as to those of SMEs,” EFG Finance Holding’s Walid Hassouna said. “Key offerings will include facilities covering both domestic and international transactions for import and export operations, supply chain financing and discounting products.”

The EGP 250 mn venture, a subsidiary of EFG Finance Holding, is expected to begin operations by the third quarter of 2018 and become fully operational by year’s end. “Venturing into the factoring space is yet another step in our strategy of diversifying our product offering,” said EFG Hermes Group CEO Karim Awad. “The new venture will leverage our liquid balance sheet and our growing relationships with financial institutions to build an optimal capital structure that is capable of meeting fast-growing demand for factoring services from both large corporates and SMEs alike.”

Okay, so what’s factoring? Think of it as payday loans for companies, only without the usurious interest rates. It’s one of the oldest forms of business finance and is, effectively, the sale of your receivables to someone at a discount. Think of it this way, at its most basic: You need cash today, and have a base of collectible invoices. EFG takes them off your hands at a discount, then goes and collects the face value of the invoice from your customers. You get (a large portion of the cash) now, EFG Hermes makes a profit from the discount at which it acquires them from you. has the best explanation we’ve seen, if you want to dive deeper.

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