Discretion is a major advantage of the Schuldschein. The product is moreover quick, flexible and involves relatively little documentation.

Discretion is what German companies have valued about Schuldschein for centuries. Mid-cap or family companies do not always want big media headlines regarding their financial transactions. A Schuldschein is a credit facility agreement that is concluded directly between a borrower and an investor. If a company wishes to capitalise on advertising, it can. However, by means of a simple request, the deal can also be handled very discreetly.

There are other advantages to Schuldschein besides privacy:

• It is an efficient way for companies to diversify their investment base, away from the traditional partner bank.
• The Schuldschein allows a company to have recourse to the capital market without burdensome processes and conditions in relation to rating. Investors carry out their own analysis.
• The documentation involved in a Schuldschein agreement is less prescriptive than in case of a bond loan. It can therefore be simpler and more concise. Fifteen pages is not unusual, particularly for a Schuldschein with a low risk profile (e.g. an issuer from the public sector).
• A Schuldschein is also flexible: it can be tailored to simple loans or complex, structured deals. The Schuldschein can be brought into line with existing financing instruments of the company and take over the securities and covenants.
• The transaction can be organised quickly.
• No minimum volume is expected. In the stock market, that quickly amounts to EUR 500 million. In the Schuldschein market, it is around the EUR 100-150 million mark, although EUR 50 or 300 million are equally possible.
• The Schuldschein is also more flexible than the stock market. The amount may be distributed across different maturities and currencies. For example, maturities can be placed in parallel at 3, 5, 7 and 10 years. Those tranches must then be refinanced every two years, making one less dependent on current market circumstances. This provides an answer to the bullet repayment issue, which features in the stock market.

Maturities are increasing

Schuldschein maturities have been increasing over the last few years. In 2012, maturities of less than three years accounted for 17% of the market, and maturities of more than seven years for 19%. In 2015, those figures were 8% and 34% respectively. The current average is 6.6 years.

(Source: Thomson Reuters LPC)

Investors

Schuldschein investors are often insurance companies, pension funds and credit institutions, particularly savings banks and cooperative banks. What attracts them to Schuldscheine?

• The product offers spreads and maturities that are not available in the syndicated loans market.
• Because of the lower amounts, more investors can access the market.
• Investors also gain access to organisations and companies that do not operate in the bond market.
• Due to the flexibility of the Schuldschein, there is something to suit every investor's tastes. Institutional investors, for example, often choose fixed coupons with a longer maturity, while commercial banks prefer medium-term maturities and variable interest coupons.

Role of the bank

The bank is often designated by the issuer to organise the loan payments. The bank plays the role of 'arranger' in that case, explains Raoul Heßling, Schuldschein expert at BNP Paribas:

"The bank advises the customer on the structure of the Schuldschein, maturities, types of interest and the content of the documentation. We also prepare a profile of the issuer and a presentation for potential investors in conjunction with the company. We obviously also use our network to approach those investors."

In 2015, Germany and Austria jointly made up 85% of the Schuldschein market. But interest is growing in other European countries, including Belgium.

Schuldschein: the word sounds unmistakably German. Indeed, our eastern neighbours have had the product for decades, and there were even predecessors that proved their worth a few centuries ago. Earlier issuers were mainly the government, at all levels. The federal states (Bundesländer) and the municipalities used this instrument to finance investments, while credit institutions also used Schuldscheine in a number of ways, including in refinancing programmes.

An increasing number of companies have recently been using Schuldscheine to raise money. These have typically been German mid-cap companies that are not listed on the stock exchange. Over the last few years, larger, listed companies have also started to enter the Schuldschein market.

What exactly is a Schuldschein? A Schuldschein is a credit facility agreement, concluded directly between a debt issuer and an investor, which a bank uses to structure the transaction. The issuer issues negotiable securities that represent the claim for repayment, in exchange for an investor lending a monetary amount on a medium or long-term basis.

What are the main differences between Schuldscheine and other forms of market financing?

1. Schuldschein versus classic investment credit The claims under a Schuldschein agreement are more liquid than in case of a classic investment loan. They can be circulated among different investors just like financial securities.
2. Schuldschein versus syndicated loans In contrast to a syndicated loan, the creditors are not connected to each other. A majority is therefore not needed for decisions. Schuldschein versus a bond issue In contrast to a bond issue, the security is not revalued on a daily basis, so the accounting also differs.

Corporate Schuldschein volume per country

(Source: Thomson Reuters LPC)

Until a few years ago, Schuldscheine did not exist outside German-speaking countries. German and Austrian companies still dominate the market today. In 2014, 69% of the volume was made up by German companies. In 2015, that figure increased to 75%. German companies issued EUR 8.3 billion of Schuldscheine in 2014, and EUR 15.2 billion in 2015. Raoul Heßling, the Schuldschein expert at BNP Paribas points out that last year's picture is somewhat inflated by a number of very large transactions:

"2015 was an exceptional year with three very large German Schuldschein transactions. These jointly represent more than one-fifth of the total issued volume. But it is entirely possible that the share of other European countries will increase more than that of Germany in the years to come. The system is already well-established in France, for instance: that country represented 8% and 7% of the market in 2014 and 2015 respectively. Over the same period, the Netherlands increased from 1% to 2%, while Belgium increased from 0% to 1%. The general trend is clear: internationalisation. Schuldschein remains a typically European story. I can see it developing into the European equivalent of private placement in the United States."

With issues of EUR 20.2 billion, 2015 was a record year for corporate Schuldscheine – an increase of 67% compared to 2014. And 2016 could be even better. Where does this success originate from?

Over the last few years, the market for 'Schuldscheindarlehen' (Schuldschein loans) to private companies has grown substantially. That growth was particularly turbulent in the wake of the financial crisis, with a few notable peaks. 2008 was such a peak year, with almost double the volume of 2007. The record of 2008 fell last year, with a volume of EUR 20.2 billion. And 2016 has also been quick out of the starting blocks. Raoul Heßling, Schuldschein expert at BNP Paribas:

"We are expecting a volume of more than EUR 5 billion in the first quarter, with a good mix of large and small companies, both in Germany and abroad. If the trend continues, 2016 will surpass 2015."

Annual Corporate Schuldschein Volume and Deal Flow

(Source: Thomson Reuters LPC)

The main reason for those record years is the volatility of the bond market. At that level, 2008 was a difficult year, with much economic nervousness and the bankruptcy of Lehman Brothers. Raoul Heßling:

"The Schuldschein market is very stable and is well-shielded from that sort of volatility. The system is normally used by mid-cap companies that are not listed on the stock exchange. Due to the difficult circumstances in 2008, during which the bond market practically stalled for a period, some companies noted that Schuldscheine could be a good alternative. I am referring to names such as BMW, Daimler, Siemens and Deutsche Telekom. As a result, the volume soared to around EUR 19 billion in 2008."

The worst loss was suffered in 2009. The bond market picked up again and Schuldscheine returned to their normal volume and users. From 2010 to 2014, the volume fluctuated around the normal EUR 10 billion and users were mainly mid-cap companies. And then came the peak of 2015. Raoul Heßling:

"With more than EUR 20 billion, that was a new record year. I see various reasons for this. Firstly, the Schuldschein has become better known as a financing tool, among both issuers and investors. Secondly, there was more merger and acquisition activity over the past year. Quite a number of companies have discovered that Schuldscheine are an efficient way to raise money. Thirdly, the bond market returned to being volatile in the second half of the year and listed companies gravitated towards the Schuldschein market again. ZF Friedrichshafen, a global player in the automobile sector, entered into a record deal of EUR 2.2 billion, for instance, while Daimler and Mann+Hummer each entered into transactions of EUR 1.1 billion."

Meanwhile, 2016 looks to be on course to match or surpass 2015. Is this becoming the new norm for Schuldscheine? Raoul Heßling remains cautious: "I am in no position to make forecasts."

Largest deals of 2015

(Source: Thomson Reuters LPC)

Factoring is playing an increasingly important role in promoting the growth of Belgian and international companies. BNP Paribas Fortis Factor provides the oxygen to their growth story.

You want your business to grow and thrive, and so all the help and guidance you can get are more than welcome. The reason is clear: support brings extra energy to your entrepreneurial spirit and essential resources to fuel your innovative growth plans.

BNP Paribas Fortis Factor, a subsidiary of BNP Paribas Fortis, offers a service designed precisely for that: to relieve stress and motivate, to promote and nurture your growth. In this interview, Jef Ramaekers, Head Factoring Benelux at BNP Paribas Fortis Factor, and Audrey Bourguet, Working Capital Advisor at BNP Paribas Fortis Corporate Banking, come together to discuss one key topic: Factoring and the positive role it can play for Belgian businesses and their international branches.

Explaining factoring succinctly, however, is a challenge. Jef Ramaekers, Head Factoring Benelux at BNP Paribas Fortis Factor, clarifies: “To start with, factoring is a means, not an end. It’s a tool for business owners or CFOs to optimise working capital. Every financial manager, in any company, will at some point ask the same question: ‘Who do I need to pay, when, and how can I pay them with the resources I have?’ Simply put, factoring enables businesses to pay suppliers without waiting for customer payments to come in. We finance invoices by converting them into directly available cash for the business.”

This process actively alleviates concerns and reduces stress factors, allowing entrepreneurs to focus on what they do best – running their business. Ramaekers adds, “We like to say ‘giving oxygen to growth stories.’ But I certainly see the value in the term ‘relieving stress’ here. By giving an entrepreneur or CFO the freedom to focus on core activities and by taking on a key part of the financial management, we create extra time and opportunities. And they also have less to worry about."

Positive shift

According to Ramaekers, the traditionally negative perception of factoring is a thing of the past: “Factoring was once seen by many business leaders as a ‘lender of last-resort’ – a way to borrow money from the bank by using assets, receivables, or customer invoices. In other words, a company’s last resort. Fortunately, those days are long behind us. We’ve evolved towards a very open attitude to factoring, allowing our division to grow into a true service provider. Our clients’ primary need remains short-term financing. Today, one in five invoices in our country is paid through factoring. Factoring is now a substantial market, representing more than one hundred billion euros per year. BNP Paribas Fortis Factor manages 41 per cent of this market, accounting for EUR 55 billion at the end of 2023.

Growth

From the bank’s perspective, factoring also represents a significant growth story. Audrey Bourguet, Working Capital Advisor at Transaction Banking for BNP Paribas Fortis, explains: “Today, factoring is the financial product that nicely aligns with the rising turnover of our companies. It provides a practical solution for working capital and is part of a suite of Transaction Banking services. In addition to Factor, this also includes Global Trade Solutions, Cash Management, Fixed Income, and Working Capital Advisory. All these services share a common goal: provide the best possible solution for our clients’ financial needs and be there for them in all situations where they can benefit from our support.”

Factoring, from the bank’s standpoint, represents an increasingly strong and positive story, unlinked from its past connotations. Bourguet adds, “You can see this in how we truly integrate factoring within our bank and the group, and in how we offer this service to businesses across all sectors and sizes. We work with a wide range of companies in the Belgian economy. As a result, we have seen that it is precisely those companies that succeed in optimising the funding of their working capital by making use of our factoring services, among other things. This reinforces our belief that it is a very positive story: we’re talking about a form of financing that seamlessly adapts to the growth of any business, large or small.”

Natural evolution

Factoring is available to small, medium-sized, and large companies alike. Ramaekers says, “We aim to provide a solution that supports businesses throughout their entire lifecycle – we’re genuinely unique in the market in this regard. This means that we are there for start-ups, SMEs, multinationals, and every type of business in between. We are the only bank on the market to have a digital solution for small businesses in the form of Easy2Cash. This digitalisation makes it a very cost-effective option with highly competitive margins, but also a reliable, particularly fast and up-to-date link with our customers and their accounting, using a digital yet personal approach. Although Easy2Cash is digital, it includes a dedicated contact person, making the solution both personal and accessible. For start-ups, for example, it’s often challenging to secure credit. For these modest, short-term credit needs, we provide a solution in consultation with the BNP Paribas Fortis banker, enabling them to keep growing without being hindered by their expanding requirements for financing, automation, accounting, etc. Factoring gives them additional resources to meet these needs.”

Ramaekers notes that the steady growth of young companies also demands an adaptation of financial services: “It’s a natural evolution that benefits both partners. If your business grows, we grow with you – it’s that simple. During all those specific growth moments – when entrepreneurs start considering additional staff or potential exports – factoring grows with them. And we do this together with the bank; the group behind this story plays as a team. And let’s not forget, we’re here even if more challenging times come. We’re well aware that a company’s journey is not always easy. It’s at those moments that the value of our expertise and the support we provide really stands out.”

When a company grows into a large enterprise with the profile of a multinational, the importance of factoring further increases. Ramaekers says, "More than 65% of the really large companies in Belgium, with a turnover of more than EUR 1 billion, use factoring services. And half of them are our customers. Factoring often provides additional economies of scale for large enterprises. For example, we can finance receivables that have no impact on a company’s debt ratio. By combining invoice pre-financing with credit insurance, companies can avoid having debt on their balance sheet, with the approval of the company auditor. It’s a technical matter, but it is this combination of various financial elements that makes factoring efficient, high-performing and valuable for many companies.”

Economic fabric

The two agree on the value of factoring in supporting the economic fabric. Bourguet explains, “Part of this supportive role is due to the fact that factoring is a completely transparent financial service – you can only finance what is effectively there.” Ramaekers adds, “Absolutely. Plus, factoring sits right in the middle of the value chain, embedded in the economic fabric. We work alongside our clients, their customers (debtors), the bank, and so on. This makes us a key figure in this chain. We coordinate and facilitate. And for this we need to have our feet firmly planted on economic ground, often for the benefit of all our customers. When we succeed in, for example, reducing the payment terms of invoices for a business, it has a positive ripple effect not only for that company but for the economic process as a whole. This is why I am convinced that we play a broad role in the economic ecosystem – often broader than is generally perceived.”

Opportunities and fair guidance are also crucial in this financial field. Ramaekers says, “At Factor, we engage in transparent discussions with the bank and our clients to find the best solution for their needs. This means we identify opportunities and often suggest them, but also act as an honest, proactive sounding board. It’s about dialogue, analysis, and constructive critique.” Bourguet concurs: “I completely agree. With a service like factoring, we are deeply involved in our clients’ economic activity – the entrepreneurs who rely on us. So, we take a broad view of every case, looking beyond just a banking product or a single solution. This is what makes BNP Paribas Fortis’s approach so strong: we operate as a team, consisting of specialists from both Factor and the bank. This group of experts from different, well-coordinated entities provides entrepreneurs and companies with a comprehensive approach, even for complex cases. These are the moments when we truly rely on our internal expertise: years of experience; colleagues with solid knowledge; reliable economic data applicable to numerous scenarios. This combination enables us not only to guide companies in the right direction but also to provide financial support that is fair, safe, and sound.”

Future

Just like the bank itself, BNP Paribas Fortis Factor frequently considers its strategic direction for the future. As a provider of forward-thinking services, it’s essential to adopt a future-oriented approach to financial services. Ramaekers notes, “Earlier, I mentioned our digital solution, Easy2Cash. I think we can be quite proud of this because it is a glimpse into the future – today. Beyond that, our services are evolving very organically towards the future: we’re constantly striving to make them accessible to an ever-wider group of clients across the economic landscape. Additionally, we’re very focused on sustainability.”

Bourguet adds, “This last aspect is a natural extension of what we do at the bank every day. Our commitment to sustainability extends seamlessly to factoring: we encourage and motivate our clients to join us on this sustainable path.”

The two teams also collaborate closely in developing new services. Ramaekers explains, “We see a significant evolution in the commercial sector, with many online stores offering deferred payment options, such as a 30-day extension. This practice is also increasingly common in the B2B market. Factoring can innovate in this area, so we see it as part of the future we’re actively developing. From a European perspective, there are other innovations too: e-invoicing, for example, is soon to become the standard for all businesses. This presents both a challenge and an opportunity in terms of services and advisory, which we’re shaping together with the bank.”

The two partners have also developed new services. Ramaekers: "We have observed a remarkable evolution in the commercial sector, where many online stores offer payment delays of 30 days, for example. This practice is also increasingly common in the B2B market. Factoring can offer an innovative solution, so this is part of the future that we are currently developing. On the European level, there are also new features: e-invoicing will soon become the norm for all companies. This presents both a challenge and an opportunity in terms of services and advice, which we are developing together with the bank."

Bourguet concludes, “It’s clear that this is a story of synergy, one where we work together seamlessly. This isn’t just rewarding for us but also for our clients. We’re rooted in the heart of the economic marketplace, yet we’re also focused on creating platforms and products that will lead the way and shape the future of this market.”

More information: https://factor.bnpparibasfortis.be/

BNP Paribas Fortis is ready for the mobility of tomorrow. And Laurent Loncke, General Manager Retail Banking and member of the bank’s management committee confirms this when he says “We do much more than lease electric vehicles”.

How can companies leverage mobility as part of their transition?

"If we look at vehicle usage alone, switching from fossil fuels to electric energy can reduce CO₂ emissions by a factor of four. This transition is being encouraged in our country more than ever by tax incentives and tax breaks. From 2035, the European Union will also ban the sale of cars with combustion engines. Whether it’s for the company fleet or company cars for employees, electric driving is the way forward, alongside other forms of mobility."

Are all businesses aware of this?

"These days, two out of every three new vehicles are company cars. And 80% of those orders are electric vehicles, a trend that is also apparent at our partner Arval."

So companies are playing a pioneering role in this transition?

"Certainly. First and foremost because former company cars find their way to the second-hand market at some point, making electric driving more accessible for everyone. Secondly, by choosing an electric car, you can encourage your friends and family to follow your example. Our recent Profacts survey (only in Dutch and French) showed that 85% of electric vehicle owners are satisfied to very satisfied that they switched to an electric vehicle. However, 42% of Belgians are still reluctant. Half of them are worried their battery will run out before they can get to a charging point."

Is their fear justified?

"Not really. Most drivers only feel comfortable with a range of 500 kilometres, even if they only drive a few dozen kilometres a day. It’s true the charging network does need to be developed further. Many people, especially those living in cities, cannot install a charging point at home. BNP Paribas Fortis is contributing to the expansion of the charging network through its participation in Optimile. This Ghent scale-up offers software solutions for charging electric cars and is developing strategic partnerships for the installation and maintenance of charging points."

Can an electric car be part of each employee’s remuneration package?

"Today, there are already less expensive vehicles on the market, making electric driving an option for middle and lower-management. The Total Cost of Ownership of an electric car is the most important factor, however. And this is still much lower than that of a vehicle with a combustion engine. Leasing is often the best solution. We have a comprehensive, tailor-made offering for all companies, regardless of their size and needs."

What exactly do you mean by a 'comprehensive offering'?

“In addition to leasing, we are able to offer charging solutions at home or at work, a charging card for public networks, the automatic reimbursement of electricity consumption at home, an app to find charging stations, and electric driving training through our many partners.”

So a complete ecosystem?

"We want to contribute to the mobility of tomorrow. By financing it, through credits or leasing, and with insurance, but also by working with partners outside our traditional activities. Like Optimile, and Touring, an organisation that is synonymous with reliability."

But mobility isn't just about cars, is it?

"We believe we need to rethink our relationship with the car. Given the climate targets and the increasing scarcity of resources, it is simply not possible to replace every internal combustion engine with an electric car at the moment. Arval offers its extensive expertise to companies considering a different approach to mobility. We help them analyse their needs, propose alternatives to the car, establish a mobility budget or draw up a mobility policy. We offer bicycle leasing, sometimes in combination with car leasing. We strongly believe in multimodality and mobility-as-a-service solutions: the option to combine different transport modes and pay for them without too much hassle. This is also one of the specialities of our partner Optimile."

Are companies and their employees open to this idea?

"The idea of employees no longer saying 'I have this amount for my car in my salary package', but rather 'I have this amount for my mobility'  is gaining traction. People are already paying for use rather than ownership in gyms or for streaming services. Mobility is going down the same route, with car-sharing and flat-rate subscriptions, making costs more predictable for businesses and private individuals. But the pace of change will also depend on the success of the federal mobility budget. For now, uptake is slow."

BNP Paribas Fortis SA/NV – Montagne du Parc/Warandeberg 3 – 1000 Brussels – VAT BE 0403.199.702 – RPM/RPR Brussels

Optimile SA/NV – Sassevaartstraat 46 bus 204, 9000 Ghent – RPM/RPR Ghent – VAT BE 0648.837.849 – www.optimile.eu – BNP Paribas Fortis SA/NV holds a greater than 10% stake in Optimile SA/NV.

Arval Belgium NV, Ikaroslaan 99, 1930 Zaventem – Brussels Register of Companies – VAT BE 0436.781.102.

Touring SA/NV, Koning Albert II-laan/Avenue Roi Albert II 4 B12, 1000 Brussels – Brussels Register of Companies – VAT BE 0403.471.401, is registered under this number with the FSMA, Rue du Congrès/Congresstraat 12-14, B-1000 Brussels, and acts as an associated agent on commission for AG Insurance SA/NV. AG Insurance SA/NV owns a greater than 10% stake in Touring SA/NV.