Factoring in Germany

The seller of goods or services assigns its receivables to a factor, a bank or a specialized finance company. The factor pays most of the invoice amount at once, typically 80 to 90 percent according to Stripe's guide to factoring in Germany, and pays the rest when the customer has paid, minus its fees. In full-service factoring the factor also takes over the credit risk of the buyer and the collection of the invoices.

Three variants make up the German market. In-house factoring leaves the management of debtors with the seller and had a share of 65 percent in 2024, full-service factoring 27 percent and maturity factoring, where the factor pays only on the due date, 8 percent, according to the German Factoring Association. Factoring can also be open, so the buyer pays the factor, or silent, so the buyer does not learn about the sale.

The 43 members of the Deutscher Factoring-Verband stand for around 97 percent of the organized factoring volume. Their turnover rose by 3.7 percent to 398.8 billion euros in 2024, equal to 9.3 percent of German GDP. International factoring reached 118.3 billion euros, almost all of it export factoring, and domestic business 280.5 billion euros.

106,850 companies used factoring in 2024. 93.9 percent of them had annual revenues of up to 10 million euros, while large corporations made up 2.5 percent of the customers and close to 60 percent of the volume. Trade was the strongest sector, followed by healthcare and the food industry.

Factoring is a financial service under the German Banking Act. A factor needs BaFin authorization under section 32 (1) in conjunction with section 1 (1a) sentence 2 no. 9 of the KWG, and the fee for the authorization is 4,646 euros. The KWG sets no minimum capital for factoring firms, and the capital and liquidity rules for lending business do not apply to them.

On IT, BaFin applies its supervisory requirements for IT in financial institutions (BAIT) to factoring firms until December 31, 2026. From January 1, 2027, the EU Digital Operational Resilience Act applies to finance leasing and factoring institutions as well, with incident reporting, resilience testing and a register of IT providers. The page on DORA in Germany explains those duties.

Full-service factoring has two prices, according to Stripe: a service fee of 0.5 to 5 percent of the invoice amount and an interest charge of 3 to 6 percent a year on the money paid out early. Maturity factoring and in-house factoring cost less because the factor does less. Factoring fees are services that carry VAT, and the sale of each receivable has to be recorded in the books in a way an auditor can follow.

The same mechanics show up at online checkouts for business buyers. In B2B buy now, pay later the provider pays the supplier at once and collects from the buyer later.

Finance Loop is the meeting place for people who finance working capital in Germany: bankers, treasury and trade finance teams, lending fintechs and the lawyers who advise them. It connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

Finance Loop supports When Banks Say 'No', a payments seminar at the NEXTOWER in Frankfurt for compliance, treasury, finance, export and legal teams. It is a partner of the FinTech Founder & Investor Evening, where Patrick Stäuble, CEO of the SME lender Teylor, talks about capital and regulation.

Yes. Factoring counts as a financial service under section 1 (1a) sentence 2 no. 9 of the German Banking Act, and the factor needs BaFin authorization under section 32 KWG. The KWG asks for no minimum capital, and from 2027 DORA applies to factoring institutions.

For full-service factoring Stripe names a service fee of 0.5 to 5 percent of the invoice and 3 to 6 percent interest a year on the advance. The final price depends on the buyers' credit quality, the invoice volume and the services the factor takes over.

In full-service factoring the factor pays early, takes the credit risk and collects the invoices. In in-house factoring the seller keeps the debtor management and collection itself and pays lower fees. In-house factoring had a 65 percent share of the German market in 2024.