The cash flow situation and the headache of debt collecting suffered by many Maltese businesses stand to be appreciably improved with the introduction to Malta of HSBC’s invoice financing.

Yesterday, the bank introduced a new line of business to its Maltese operations, a fully comprehensive invoice finance, or factoring, service aimed specifically at business customers.

The service involves a business selling its account receivables or debtors to the bank, which takes on the role of factor. The bank makes an immediate payment to the seller and then arranges to collect the debts itself – taking a

substantial weight off the cost and difficulties of running a business.

HSBC Bank Malta head of commercial banking James Dunbar Cousin expects the new line of business to be of great benefit to Malta’s business community. “Business banking in Malta has seen considerable change over the years,” he explains. “We believe it will change again with HSBC’s new Invoice Finance package, which will significantly help improve the cash flow of companies in Malta.”

In addition to providing up to 85 per cent of invoice finance, HSBC will also take on the seller’s credit function role by managing the seller’s sales ledger, collecting payments due and reconciling account receivables.

To begin with, the new business line will deal with the issuing and collecting of invoice financing, and the bank expects that, once the business is built up, it could very well be expanded to international financing arrangements.

HSBC Malta chief executive officer Shaun Wallis observed: “Initially we will provide only domestic invoice finance and on a ‘with recourse’ basis. When this has settled down locally, we will roll out international invoice finance in Europe and without recourse, ie with protection.

“We believe this product for businesses in Malta will dramatically improve the cash flow in the business sector – particularly because so many of the businesses involved are HSBC customers anyway. This, in turn, will help our economy move forward.”

With the service now being available locally, Malta joins just 15 other countries in which HSBC has been offering such services for the last four decades. The expansion of the service to Malta constitutes the first stepping stone in what Peter Tandy, HSBC group senior manager for receivables finance, describes as a pan-European expansion of the invoice finance business.

Mr Wallis added: “Factoring will bring more discipline to local payment practices. We also feel that the debt term will decrease steadily as more and more clients appreciate the benefits of factoring, controlling costs and achieving peace of mind.”