In emerging and developed markets alike, factoring
companies play a vital role in supporting the liquidity and growth
of small and medium-sized enterprises (SMEs). These companies offer
short-term financing by purchasing receivables, effectively helping
clients convert credit sales into immediate cash. Given their
growing importance in non-banking financial
sectors—particularly in markets like Egypt where financial
inclusion is a key economic goal—accurately valuing factoring
companies is essential for investors, regulators, and business
owners alike.
Valuation, however, is not straightforward. Unlike traditional
manufacturing or service companies, factoring firms operate under a
distinct financial model that requires specialized valuation
approaches. This article outlines the nature of factoring, and
provides a detailed guide on how such companies should be
valued.