Working Capital Index Finds Central Europe and EMEA Ripe for Growth

CEMEA Growth Corporates are expected to increase their use of working capital solutions, increasing from 58% to 95%.

Working capital enables companies to avoid disturbances in operations in the short term and power growth in the long term. In the Central Europe, Middle East and Africa (CEMEA) region, 58% of Growth Corporates used working capital solutions last year. The region’s low usage rate relative to others implies that firms are not taking full advantage of available external financing.95%: Share of CEMEA Growth Corporates planning to access working capital this year

CEMEA Growth Corporates report that external financing is important for improved business metrics and buyer-supplier relationships. Seventy-seven percent of Growth Corporates in CEMEA directly report using it for this purpose. This may be why they are now looking at these solutions and why 95% will use them in 2024.

These are some key findings in “2023-2024 Growth Corporates Working Capital Index: CEMEA Edition,” a PYMNTS Intelligence report commissioned by Visa. The report draws insights from a survey of 159 corporate CFOs or treasurers at CEMEA Growth Corporates conducted between March 9, 2023, and June 12, 2023. The survey sought to understand the working capital solutions available to Growth Corporates, their preferred use of this capital, 2024 plans and the impact of these solutions on the operations and business performance.

Other key findings from the report include:25%: Portion of Growth Corporates in CEMEA that used working capital loans in 2023

CEMEA Growth Corporates use working capital loans and bank lines of credit the most.

Working capital loans were the most popular solution in CEMEA in 2023, with 25% of firms using them. Despite this relatively low usage rate, there is a positive outlook. It opens up opportunities to expand working capital solutions in the region. The opportunities may depend on the sector. Among healthcare firms in the region, invoice factoring and unused corporate credit lines are also prominent.

Most agriculture and healthcare Growth Corporates strategically used external financing.

Overall, 60% of CEMEA firms used external financing for strategic purposes. Thirty-one percent of these were for cash flow gaps and 29% for growth initiatives. The firms that did not use working capital typically cited the high cost of capital and lengthy decision cycles as obstacles to accessing external financing.33%: Share of CEMEA Growth Corporates planning to use virtual cards this year

CEMEA top performers strategically used external financing.

CEMEA top performers’ focus on strategically using working capital highlights these solutions’ potential to support product expansion, system upgrades and other signifiers of business growth. The remaining 25% reported not using any solutions due to a lack of need. Meanwhile, just 19% of middle-performing and no low-performing Growth Corporates used external financing for strategic purposes.

CEMEA Growth Corporates had one of the lower usages of working capital strategically in our study, as access and cost kept external financing out of the range for many. There are positive signs, though, as the region’s use of working capital solutions is expected to grow 64%. Download the report to learn more about the future of working capital solutions in CEMEA.