Why insure your receivables?
Secure revenues and profit
Receivables represent great values. Norwegian companies often have outstanding receivables which exceed their equity. Losses on receivables could erase profits and, in the worst case scenario, lead a company into financial problems. With credit insurance you can greatly reduce the risk of non- settlement. Against a marginal cost you obtain more stable results.
A professional credit evaluation
Our professional credit risk managers review your portfolio of customers and your business avoids 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 sources of information, both external and internal.
Improve your competitive edge
90% of all trades are conducted on short-term credit. Offering a credit period is often central to winning new customers. With a credit insurance, you can offer your customers credit whithout risking non- payment. In emerging markets, interest rates are relatively 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. With a credit insurance policy one of our cooperating banks can grant you financing based on your accounts receivable. Usually through 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 gets a pledge in the insurance policy and hence is entitled to a given insurance settlement. Your business improves it`s 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.
Receivable purchase means that you sell the company`s invoices to a bank. If the invoice relates to a foreign buyer, then most banks will require the invoice to be insured. The sale of invoices brings 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 receivables. The company receives cash which may be used to reduce 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 credit insurance policy from GIEK Kredittforsikring, the bank can provide financing while tying up less capital.
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.