Tomasz Kukulski, chairman of the board of Bibby Financial Services in Poland
Bibby Financial Services (BFS) was spun off from Bibby Line Group, a family-owned shipping firm with a history going back over 200 years. BFS was set up in 1982 and has been present in Poland since 2002. Tomasz Kukulski, chairman of the board of Bibby Financial Services in Poland, talks to the BPCC’s Michael Dembinski about the opportunities and challenges of financing small- and medium-sized businesses on this market.
How does the parent company BFS, which has subsidiaries across Europe and Asia, see Poland in a macroeconomic global context?
Despite facing recent challenges, including the impact of the pandemic and the war in Ukraine, Poland has demonstrated remarkable resilience and holds immense potential for future growth. While there are ongoing macroeconomic challenges such as high inflation, energy crises, and low consumption, we remain optimistic. Poland has managed to navigate these difficulties without significant unemployment or major declines in business investments thus far.
Poland’s strategic central location in Europe, its well-developed infrastructure, and comparatively lower operational costs compared to Western countries continue to attract industry giants, particularly in the context of near-shoring. This has resulted in a notable influx of foreign investments and a significant expansion of the Polish export sector. These two factors play a pivotal role in Poland’s current economic growth, which is now projected to accelerate with each passing quarter, after a 0.3% decline in the first quarter of 2023. There are some indications of inflation’s gradual decline, although it may take two to three years to reach the target set by the National Bank of Poland.
Poland deserves commendation for its ability to adapt to the changing industrial cycle and address concerns related to supply chain security. These factors, combined with ongoing geopolitical developments in the region, underscore the significance of Poland in the global macroeconomic context.
Bibby Financial is focused on SMEs, which often find it much more difficult to access finance for growth. How do you support them, given the conditions of the Polish market at this stage of the economic cycle?
With high inflation, elevated interest rates, and tightened financing conditions, traditional avenues such as bank loans may be less viable for these businesses. However, as a leading independent financial services partner dedicated to supporting SMEs, Bibby Financial offers a solution which serves as a flexible alternative to traditional financing. Factoring involves a financial transaction where a business sells its invoices to a third party, known as a factor, at a discount. Unlike conventional loans, factoring provides funding based on a company’s sales. This means that the amount of financing available through factoring is directly tied to a business’s revenue. By offering immediate access to funds without the need for collateral or the burden of repayments, factoring addresses the limitations SMEs face with traditional loans. This approach aligns perfectly with the unique needs of SMEs, which are crucial in the current economic conditions where businesses are cautious about taking on additional debt due to prevailing uncertainty.
Through factoring, SMEs can convert their accounts receivable into instant cash. This newfound liquidity empowers them to invest in growth initiatives, manage expenses, improve cash flow, and navigate through periods of uncertainty, all while avoiding further indebtedness. Given the challenging backdrop of high inflation and interest rates, factoring serves as a lifeline for SMEs in the Polish market, providing the necessary financial support for their expansion and resilience in these trying times.
What are the biggest economic challenges facing your clients in Poland today? Do you see any problems specific to SMEs on the Polish market that don’t affect larger corporates?
Our clients in Poland, particularly SMEs, face a range of significant economic challenges in the current landscape. It’s important to acknowledge that smaller businesses are often more vulnerable to economic downturns, inflation, and financing conditions due to their limited financial reserves. They may also face greater difficulties in adapting to changes in regulations and legislation compared to larger corporations, given their relatively smaller capacity to swiftly adjust their operations.
One specific challenge that affects SMEs in Poland is the issue of payment delays. SMEs often find themselves in a weaker position compared to larger business partners, which can result in delays in receiving payments for goods or services rendered. Late payments have long been a concern for Polish companies, and this issue is particularly pronounced in the SME sector. It becomes even more problematic during periods of crises or economic slowdowns. Research indicates that a significant percentage, as high as 80-90%, of firms in Poland experience difficulties with overdue payments.
Moreover, SMEs in Poland may also encounter limited access to credit, further constraining their financial capabilities. This lack of access to credit exacerbates the challenges they face with financial liquidity, making it more challenging for them to manage cash flow and invest in their growth initiatives.
At Bibby Financial Services, we understand these specific challenges faced by SMEs in the Polish market. We aim to address their needs and support their financial stability. Through our solutions we provide SMEs with immediate access to cash flow, helping them bridge the gap caused by payment delays. By leveraging our expertise and resources, we work closely with SMEs to navigate economic challenges and provide tailored financial solutions that cater to their unique circumstances.
In recent years, Polish SMEs have in general cut back on their investments, with owner-managers citing geopolitical and economic uncertainty as key factors behind their decisions. How does Bibby Financial see Polish SME investment, and what can it do to support SMEs as they strive for growth?
Undoubtedly, the increase in energy and commodity prices, high inflation and interest rates, as well as the economic slowdown and economic uncertainty, did not favour investments. These factors have impacted owner-managers decisions and their willingness to take risks. However, Bibby Financial recognises the significance of investments for companies to remain competitive and adapt to evolving regulations across various sectors. That’s why we believe that providing access to flexible funding solutions is essential for supporting SMEs as they strive for growth, even in uncertain times.
Our recent spring survey, the Bibby SME Index, revealed a growing sense of optimism among entrepreneurs across various industries. They expressed confidence in improving sales levels and the financial liquidity of their companies. According to another study done by BFS, the Global Business Monitor, it appears that only one in five SMEs in Poland are not confident about business prospects in 2023.
This optimistic outlook should encourage SMEs to make investments and decisions regarding the further development of their businesses, increase productivity, and foster innovation within their firms. From an economic perspective, this can contribute to a faster recovery, as SMEs form the foundation of the Polish economy, accounting for nearly half of the country’s GDP.
So, by facilitating access to funding through factoring and highlighting the positive sentiment among entrepreneurs, Bibby Financial Services aims to support Polish SMEs in overcoming investment challenges and embracing growth opportunities in a dynamic and ever-changing business landscape.
Looking at your portfolio of clients, how expansive are Polish SMEs when it comes to internationalising? To what extent do they see the whole EU as a home market? How do they fare in markets outside the EU – the Middle East, or Africa, for example?
Polish SMEs have shown a relatively lower level of internationalisation compared to SMEs in other European countries. While larger companies, particularly those with foreign capital, have been the primary drivers of export growth, Polish SMEs have primarily participated in indirect exports through their involvement in global value chains facilitated by multinational corporations.
According to data from Poland’s central statistical office, GUS, SMEs accounted for 95% of Polish exporters in 2020 but generated only 53% of the total export value. Whilst large companies represented only 5% of exporters, but contributed 47% of the export value. These statistics highlight the challenges that smaller businesses face in terms of production capacity, organisation, and marketing, which can hinder their participation in foreign trade.
However, despite these barriers, there has been a growing interest also among Polish SMEs in expanding internationally, as evidenced by the increasing contribution of exports of goods and services to GDP, which has risen from 39.9% to 60.7% between 2010 and 2021.
This interest in foreign trade stems from the saturation of the domestic market and the pursuit of new growth opportunities. Many SMEs already consider the EU as their home market, benefiting from the advantages of streamlined trade, shared regulatory frameworks, and cultural similarities within the EU. This has facilitated their expansion efforts and allowed them to tap into the potential of the EU market. Medium-sized Polish firms have also started exploring opportunities beyond the EU, venturing into markets such as the Middle East, Africa, and Asia. However, entering markets outside the EU presents additional challenges, including regulatory complexities, cultural differences, language barriers, and logistical issues, which can be particularly demanding for SMEs with limited resources.
At Bibby Financial Services, we recognise the growing trend of internationalisation among Polish SMEs and strive to support their aspirations. We offer export factoring, which helps businesses manage the risks associated with international trade, such as currency fluctuations and payment delays. Additionally, we provide guidance and expertise on international markets, assisting SMEs in navigating the complexities of global trade. With our international presence and deep understanding of various markets, we can offer valuable insights to support Polish SMEs in their global expansion efforts.
How has Brexit affected the fortunes of Polish businesses trading with the UK? According to British trade stats, the first quarter of 2023 saw the value of Polish goods exported to the UK at a record level (£3.2 billion) – but given the difficulties associated with small-scale logistics, does this figure reflect rising exports from Poland’s larger exporters, at the expense of SMEs?
Brexit has brought a mixed impact on Polish businesses trading with the UK. While it has presented new opportunities for Polish businesses to fill gaps left by exporters from other EU countries in the UK market, it has also introduced challenges in the form of increased paperwork, customs checks, and non-tariff barriers. These challenges have added costs and complexities, particularly for businesses involved in small-scale logistics.
Despite these obstacles, many Polish businesses have successfully adapted to the new post-Brexit landscape and capitalised on the opportunities it presents. The Polish food sector, in particular, has performed well in the UK market, as there has been increased demand for Polish food products due to shortages of certain goods.
It’s worth noting that although the UK has fallen to the fourth position in the ranking of the largest markets for Polish goods due to Brexit, Polish exports to the UK have started to grow steadily after an initial decline. According to GUS, in the first four months of this year, exports to the UK reached €5.7 billion, marking a 6.3% increase compared to the previous year. While this figure may reflect rising exports from Poland’s larger exporters, it is important to recognise that smaller companies also contribute to this growth. Polish businesses have demonstrated their ability to adapt to the new trading conditions, and certain sectors have experienced increased demand in the UK market.
What are the specific challenges associated with the current macroeconomic climate of high inflation and high borrowing costs – and how can Bibby Financial ease the pressures on SMEs?
These challenges include reduced profitability due to increasing costs of goods and services and difficulties in accessing external financing. SMEs often encounter greater obstacles in securing funding compared to larger businesses, which can lead to payment delays and cash flow constraints.
To alleviate these pressures on SMEs, Bibby Financial Services understands the importance of providing tailored solutions. Our factoring services help SMEs overcome liquidity challenges by bridging the gap between invoicing and receiving payment, mitigating the impact of payment delays and improving cash flow. This allows businesses to cover their operational expenses, seize growth opportunities, and effectively manage their day-to-day financial obligations. Thus, by leveraging its knowledge and experience, Bibby Financial Services assists SMEs in mitigating the negative effects of inflation and borrowing costs on their operations
Recognising the importance of flexible financing options for SMEs, we tailor our financial solutions to meet the unique needs of each business. This approach ensures that SMEs have access to the necessary funding while minimising the burden of high borrowing costs. By offering customised financial support, Bibby Financial Services aims to alleviate the pressures faced by SMEs and provide them with the tools they need to thrive in the current macroeconomic climate.
Do you work with Polish start-ups? How entrepreneurial is Poland as an economy?
We do work with Polish start-ups and support the entrepreneurial spirit that thrives in Poland’s economy. Small and medium-sized companies constitute a significant portion, accounting for 95% of all enterprises in Poland. Micro-enterprises alone contribute to almost one-third of Poland’s GDP, highlighting the country’s robust entrepreneurial ecosystem. Polish entrepreneurs are not afraid of the challenges that come with running their businesses.
Eurostat data affirms Poland’s entrepreneurial vitality, showing that the growth rate of new companies in Poland exceeds the EU average in relation to existing ones. In 2022, there were 7% more new companies in Poland compared to the previous year, according to data from GUS and the National Court Register (KRS). However, running a business, especially in the first year with rapidly rising costs, presents a significant challenge. Statistics indicate that just over two out of three companies successfully navigated their first year of operation in Poland.
Many new businesses do not have access to bank loans, but at Bibby Financial Services, we embrace the opportunity to provide financing to these companies. Our factoring services do not require a long operational history or specific duration of operation. The key consideration is that the company has a group of regular customers for its products or services, as the factor receives payment directly from the contractor. This makes it a suitable solution for companies that have not been in the market for a long time, particularly those collaborating with larger entities. In such relationships, larger enterprises often require invoices with deferred payment terms. Our offering for micro-enterprises further simplifies procedures, removing minimum commission requirements and fixed agreement durations.
By acknowledging the significant presence of start-ups and SMEs in Poland’s economy, Bibby Financial Services embraces the opportunity to support these emerging businesses through tailored financial solutions.
