Montenegrin financial market is known for being very bank-centric. The main financing sources come from banks, and the main financial instrument used in business is credit. This trend has existed for many years, so companies on the market are used to operating with credit support from banking institutions.

Regardless of acquired habits, Montenegrin companies quickly accepted factoring services, particularly reverse factoring, which involves financing their obligations to suppliers.

It is a simple and convenient product for a company as it is similar to a working capital loan, but it is tied to a specific job, that is, a contract or an invoice, whereby the company is financed based on its credit rating. By using this type of factoring, Montenegrin companies were able to get an additional discount from suppliers or an extension of payment terms this year.

In the first quarter of 2021, more than half of the approved factoring arrangements involving FS were approved through reverse factoring.

During the second quarter, when economic activity increased, liquidity slightly improved, and companies prepared for the upcoming season, the demand for classic, direct factoring with recourse, which implies the purchase of receivable that are not yet due and undisputed, increased. This product was most often used by wholesalers, mostly for the HORECA program, in order to get liquid funds faster before the start of the summer season. Direct recourse factoring was also accepted by construction companies that used it to collect more quickly their proceeds of real estate sold or works performed. Thus, in the second quarter, out of 43 arrangements, 24 were approved through recourse factoring, and 19 for reverse factoring. The same trend continued in the third quarter of 2021 as the most active part of the year, when the same proportion between the recourse factoring arrangements and reverse factoring was maintained.

At the beginning of the last quarter of the year, reverse factoring again became a more popular product, which is logical, because its purpose is most often the acquisition of new stock of goods.

What we have been able to observe so far, within the factoring business at FS, is that companies mostly use reverse factoring in the pre-season and post-season to secure product stocks or free up credit lines with suppliers, while during the summer season they use recourse factoring to get to the cash faster.

One of the main reasons that has been present for a long time, and which continues to complicate the conduct of business, is non-compliance with payment due dates. We hope that with the advancement of economic activities, this problem will be less present.

For more information about the types of factoring and the approval process, go to the following link.