Corporate Finance Instrument: Single-Factoring and Sales of Defaulted Accounts (at the example of car dealers and repair service in Germany)

Abstract

The objective of the study was to determine the volume of defaulted receivables within the car dealer and repair and maintenance service industry in Germany and what the current methods of debt collection were. The purpose was to find out whether they knew what sorts of instruments for receivables trading exist, which ones they used already, and if they knew and could possibly consider using an online receivables exchange such as the one Debitos GmbH started in Germany. For this purpose the factoring process as well as the identification of the sectoral cash gap was reviewed by way of a literature survey.

The data for this thesis were collected by using the quantitative method with an online survey which was answered by 22 managing directors of car dealers in Germany.

The study showed that only 0.18% of the receivables default each year. The current methods of cash collection included the use of an internal debt collection department, external debt collection services as well as legal enforcement. None of the respondents used factoring. 73% of the respondents did not know of an online receivables exchange platform and no car dealer sells defaulted receivables yet. Further study is required to gain more knowledge about the buyer-seller relationship when entering into a factoring contract and how the debt purchase could influence the company’s image.