The X-Factor

Abstract: This thesis aims to provide an understanding regarding the determinants of the usage of factoring and the perceived attitudes towards factoring. It will also provide a contemporary view of factoring as a financing solution and try to explain the usage in the context of financial theories. The thesis uses a quantitative research strategy combined with a mixture of a deductive and inductive approach. The primary data has been collected by using a cross-sectional design, a survey, and is discussed by making descriptive comparisons on the results. The theoretical perspective is based on financial theories regarding how managers reason when evaluating the financing solutions for their enterprise. The theories used in this thesis are the pecking order theory and the incentive-signalling theory. The thesis also uses fundamental information about factoring. The empirics used in this thesis consist of primary data gathered from Small and Medium-Sized Enterprises in Skåne and Blekinge, Sweden. The data was collected from enterprises at Ideon and Företagarna Region Syd. The number of answers from Ideon amounted to 43 and the number of answers from Företagarna Region Syd amounted to 23. The study shows that factoring is not a financial solution preferable by Small and Medium-sized Enterprises and that the current usage of factoring is relatively low. There are indications of a negative attitude towards factoring and that the enterprises prefer other financing solutions when available. We found that the major determinants of the usage of factoring are the maturity of the enterprise and the respondent’s perceived knowledge about factoring. The usage of factoring can be explained to some extent by the pecking order theory and the incentive-signalling theory, due to the high costs of factoring and the negative image the usage may entail.