The European Bank for Reconstruction and Development (EBRD) has agreed to a €90mn loan to Raiffeisen Factoring in order to reach small and medium enterprises (SMEs) in Croatia, and continue its promotion of factoring as a strong financial product in today’s economic context.

The €90mn EBRD loan will be structured in three tranches and will provide the company with continued medium-term financing support.

“SMEs are strong vehicles of the Croatian economy, contributing 55% of total value added to the national economy and providing 67% of total employment,” says EBRD vice president Phil Benner.

The EBRD has been involved in the promotion of factoring services for businesses through its Trade Facilitation Programme for some time and has been investing in the development of factoring businesses.

Despite having been used for decades, factoring is experiencing a marked revival in the current economic context, boosted by the development of more sophisticated legal and technical solutions, says the bank.

Its legal transition team have also set up the Factoring Legal Development Programme, to help countries with legislative reforms, in order to create a more enabling legal framework for factoring activities and raising the legal certainty of factoring transactions.

According to the European Union Federation (EUF), over the last 5 years, factoring turnover in the EU constantly grew at a compound annual growth rate of 7%.

The EUF says factoring is increasingly being perceived by companies as an alternative to short term loans.  It reports that during the 2011-2014 period there was a decrease in short term funding by an amount which exactly corresponds with the increase in factoring turnover.

“We are expanding our cooperation with Raiffeisen as a direct result of our support for a new law on factoring,” says EBRD country director Vedrana Jelusic Kasic.

“We are encouraged by the successful implementation of previous loans which have demonstrated strong market demand for this product, especially from SMEs.”

Raiffeisen Factoring is a leading player in the Croatian factoring market that aims to provide support to clients in the less developed regions of the country.

“Factoring is the fastest growing financial product in Middle and Eastern Europe,” says the company’s board president Igor Fiser.

“The loan proceeds will be used to increase SME placements as well as to create new factoring products.”

The EBRD has been active in Croatia as an investor since the country’s independence and has invested some €3.5 billion in 187 projects to date.