Why No One Has Proper Loss Data on Trade Receivables

I was recently asked if I had any good data on default rates of trade receivables. The question went something like is there any data that has that grouped by risk?

The right question.

For true sale of receivables brought on by supply chain finance, you have programs that are true buyer risk (brought on by irrevocable payment undertakings or IPUs) and those that have no IPUs, and thus are subject to credit note adjustments.

Then you have seller based invoice solutions, the more traditional factoring stuff but with technology. The risk here is going to be non rated buyer receivables, and factors may report losses (or not) to central bodies like the CFA or IFA.  You also have eFactors – lending on both single and basket of invoices. There are not many of those at the moment, and its early days.

Then of course you have programs where loans are based on pooled receivables, etc.

I tend to doubt self-reported data and here’s why.

Lending communities such as the Commercial Finance Association or the IFSA (factoring) may be able to initiate an ongoing data collection exercise, but defining what is a loss, what is a default, what are recovery rates, etc. and standardizing across the participants is no easy task.   The easy way is just accepting each participants data and reporting on various loss rates by loan products.

To get this data would be difficult. I at one time tried to do a league table around supply chain finance, and could not get the major players to cooperate. The problem is all this data is private, and no one wants to lift the kimono.

To get this data around various B2B FinTech platforms would also be difficult. Official national data on the size of FinTech credit markets are limited. In numerous jurisdictions, FinTech lenders are not subject to regulatory data reporting requirements

So bottom line, there are some self-reported pockets of this data, but a clear picture, no.

As usual, buyer and investor caveat emptor. Know what you are buying!

p.s. If anyone knows a reliable data source, please let me know.

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