Why use credit insurance?
Secure revenues and profit
Accounts receivable represent great values. Norwegian companies often have outstanding accounts receivable which exceed their equity. Losses on accounts receivable can erase profits and, in the worst case scenario, lead the company into financial problems. With credit insurance you can be sure of settlement. You give away a small margin and in return obtain more stable results.
A more professional credit evaluation
Our professional credit counselors review your portfolio of customers so your business avoids assuming unneccesary risk. Your portfolio is reviewed and monitored on a regular basis and credit limits are set for your customers. Thousands of companies are monitored on a regular basis worldwide. Our credit evaluations are based on several information sources.
Improve your competitive edge
90% of all trades are done on short-term credit. Offering credit can be central to winning new customers. With a credit insurance, you can offer your customers credit whilst being certain to receive payment. In emerging markets, interest rates are often high and the alternative to supplier credit is expensive. The higher the interest rate level in your customer's home country, the greater the value of supplier credit.
Get access to cash by financing or selling accounts receivable
We cooperate with a number of financial institutions. If you have taken out a credit insurance policy then one of our cooperating banks can grant you financing based on the accounts receivable. This can happen via factoring or invoice sales.
Factoring means that the company receives up to 90% of the invoice value amount as soon as the sale is made. Remaining amount less a fee is transferred when the end customer pays.
The bank pledges the insurance policy is and is entitled to the insurance settlement. Your business improves liquidity and is secured payment.
With GIEK Kredittforsikring, the funding base becomes higher, and you can finance accounts receivable against debtors worldwide. As a result, your business may grow faster.
We cooperate with leading financial institutions in the field.
Receivable purchase means that you sell the company`s invoices to a bank. Does the invoice relate to a foreign buyer, then most banks will require the invoice to be insured. Selling invoices gives several advantages:
- liquidity improves
- a more flexible working capital arrangement. Invoices can be sold when you need to, for example during periods of peak demand
- purchase programs are mostly non- recourse, with the additional effect of improving key- ratios, see more below
Improve key ratios- ROCE (Return on Capital Employed)
Companies are measured by owners and lenders on a number of key figures. A widely used parameter is Debt / EBITDA. Several financial institutions offer purchase schemes where the company sells its accounts receivable. The company receives cash that can down-regulate the debt.
The balance will be smaller and the key figure Debt / EBITDA improve. This makes it easier to comply with covenants and the company gets cheaper financing. The buyout arrangements will usually require that the receivables are credit insured.
We work with leading financial institutions and can help your business set up a buyout program.
Reverse Factoring & Supply Chain Financing (SCF)
GIEK Kredittforsikring has modified the insurance terms in order to offer credit protection to the banking sector. With an agreement from GIEK Kredittforsikring, the bank can reduce capital requirements and thus provide more financing.
More companies are offering their suppliers to participate in Supply Chain Financing (SCF) programs. In a SCF program a bank will discount the invoices that the supplier has on their customer. In order for a SCF program to be attractive for a supplier, the financing cost should be lower than the cost for an overdraft facility.
In an SCF setup, the interest rate is determined by the buyer's creditworthiness. The bank gets an increased exposure on the buyer, for which it must tie up capital.
The bank can take out a credit insurance to reduce capital tied up as well as credit risk. Often, the insurance cost will be lower than the bank's capital cost.