Instant Factoring Study: Wholesale and Distribution Sector in Romania

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Instant Factoring, the Romanian fintech specializing in microfinance for small and medium enterprises, launches a sector study on the challenges facing the wholesale and distribution industry post-pandemic and shows the effects of the military- politics in Ukraine. Romanian entrepreneurs interviewed by Instant Factoring complain about the massive increase in payment terms and the supply chain crisis that affects the entire economy of the country. To address these challenges, entrepreneurs have resorted to factoring, a solution that helps entrepreneurs continue their businesses.

Initially, the year 2022 came with a gradual reopening of the global economy as Romania lifted all Covid restrictions. Wholesale trade turnover increased by 28.8%, in the first four months of this year, compared to a similar period in 2021, according to the National Institute of Statistics (INS).

“During the pandemic, merchants have had to adapt to the situation and adopt new methods to continue their business. With the crisis in Ukraine, most industries have been affected due to raw materials and packaging. After that, all the supply chain costs led to crises. One crisis that the world is not yet talking about much is the workforce crisis. Many Romanians are going abroad because the restrictions related to the pandemic have been lifted and they can return to work outside our country”, explains Cătălina Aldea, consultant and managing partner at Aldea Consulting.

More than 40% more expensive for raw materials

With the military-economic crisis in Ukraine, price increases continued and the price of raw materials in several industries, including the food industry, increased by more than 40%.

“If before palm oil was 4 lei, now it is 14 lei. Margarine went from 4 lei to 12 lei, and sunflower went from 8 lei to 15 lei/kg”explains a representative of the food distribution of Oradea.

Additionally, small businesses have experienced an increase in late payments. Currently, in some cases carriers receive payment even after 120 days.

Most of the time, in retail and wholesale, the question of payment terms is difficult to manage because they are not necessarily calculated from the first day of invoicing. Retailers, for example, have to pay their importers faster than they collect money from customers», explains Cristian Ionescu, CEO of Instant Factoring.

46% increase in fuels

This conflict also caused a price increase. Fuel prices, for example, have increased by 46% compared to May 2020, when the price of diesel was 4.27 lei/litre. In June this year, diesel reached 9.24 lei/litre.

Now we have logistical problems because the border is blocked due to the war in Ukraine. Before, it took 2-3 days for a truck to arrive from Moldova to Romania, but now it takes up to two weeks. It means higher transportation cost», explains Oleg Caminschi, owner of the distribution company FRUDOVA FRUITS SRL.

Factoring, the ideal solution for optimal cash flow

For wholesale entrepreneurs, one of the most accessible solutions has proven to be factoring, the discounting of invoices for the rapid acquisition of cash. When asked what they paid first with the money obtained from factoring, most representatives of wholesale and distribution companies said that they could pay their bills on time, while others said they were using the money to grow their business.

“Factoring has helped us to increase our inventory to increase sales. It is important in our business because it helps us grow. With the help of Instant Factoring, we have increased the turnover of goods by 50%”, explains a representative of ANBOSE BEVERAGES SRL, a wholesale organic juice company.

What helped us the most was having more stock in the warehouse and automatically increasing our sales. Obviously, in our business, it is important to increase sales because it accompanies the development of the company“, says the shareholder of FRUDOVA FRUITS SRL.

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