Factoring in Czech RepublicFactoring in Czech Republic

Key FiguresKey Figures

Area 78,864 km2Area 78,864 km2 Population 10.4 Population 10.4

millionmillion LabourLabour force 5.3 force 5.3

millionmillion Capital PragueCapital Prague LanguageLanguage CzechCzech CurrencyCurrency Czech Czech

Crown (CZK)Crown (CZK)

GDP (US$ bn) 82,0 GDP (US$ bn) 82,0 CPI app. 1 %CPI app. 1 % Gross Foreign Debt Gross Foreign Debt

(US$ bn) (US$ bn) 29,029,0 10Y Bond Yield 4,10Y Bond Yield 4,4%4% CZK/EUR CZK/EUR 31,231,2 CZK/USD CZK/USD 29,029,0 3M PRIBOR3M PRIBOR 2,32,3 % %

Economy StructureEconomy Structure

Trade; 16%

Manufacturing; 29%

Transportation and

Communication; 11%Real Estate

Activities; 12%

Electricity, Gas; 4%

Financial services; 6%

Other Service Activities; 10%

Others; 3%

Agriculture, hunting, forestry,

fishing; 6%Construction; 3%

Roots of FactoringRoots of Factoring

Mid 80s in CzechoslovakiaMid 80s in Czechoslovakia Purpose: guarantee for exportsPurpose: guarantee for exports Fastened FX Cash FlowFastened FX Cash Flow Clients: FTO‘s selling consumer Clients: FTO‘s selling consumer

goodsgoods Partners: factors in Scandinavia, UK, Partners: factors in Scandinavia, UK,

Germany, Austria, France Germany, Austria, France

• Turnover 1989 >100 m EURTurnover 1989 >100 m EUR

Factoring NowFactoring Now

Purchase of ReceivablesPurchase of Receivables Domestic - 80% RecourseDomestic - 80% Recourse Export – 80 % Non-recourseExport – 80 % Non-recourse Import – 30 % of International (FCI)Import – 30 % of International (FCI) Financing of A/R ( Nearly Entirely )Financing of A/R ( Nearly Entirely ) Less Credit CoverLess Credit Cover Collection and S/L Admin Collection and S/L Admin

Factoring ClientFactoring Clientss

Small and Medium Size CompaniesSmall and Medium Size Companies Startups /ClosedownsStartups /Closedowns Transforming Companies Transforming Companies Production, Trade and TransportationProduction, Trade and Transportation T/O 0,75 to 30 Mio EURT/O 0,75 to 30 Mio EUR Average Contract Retention 6 to 8 Average Contract Retention 6 to 8

YearsYears

Factoring VolumesFactoring Volumes

0

200

400

600

800

1000

1200

1400

EUR Mio

1992 1994 1996 1998 2000 2002

Domestic International

OutlookOutlook

0,0% 2,0% 4,0% 6,0% 8,0% 10,0%

Ireland

Portugal

Netherlands

Belgium

Denmark

Czech Republic

Greece

Slovakia

Volumes / GDP Ratio

Role of FactoringRole of Factoring

Distributes working capital to SMEsDistributes working capital to SMEs Selects and provides financing to Selects and provides financing to

small companies with good small companies with good receivables in the phase of their receivables in the phase of their expansionexpansion

Supports companies in their difficult Supports companies in their difficult timestimes

What We Need ?What We Need ?In Order to Better Serve Our ClientsIn Order to Better Serve Our Clients

Stable Legal FrameworkStable Legal Framework Specification of Factoring in Specification of Factoring in

Commercial Code, differentiation Commercial Code, differentiation from “Bad Debt“ tradingfrom “Bad Debt“ trading

Revision of current wording of Revision of current wording of Assignment in Law (Ban of Assignment in Law (Ban of Assignment )Assignment )

More effective legal system and More effective legal system and bankruptcy procedurebankruptcy procedure

Thank YouThank You

Jiri Matula, Transfinance a.s, Prague, Czech Republic, jiri.matula@transfinance.cz