GOVERNMENT SUPPORTED TRADE RECEIVABLE INSURANCE FOR SMES

WHAT IS THE STATE SUPPORTED TRADE RECEIVABLE INSURANCE SYSTEM?


State Supported Trade Receivables Insurance is an insurance system that entered into force by the Ministry of Treasury and Finance as of 01 January 2019.


With this regulation, in case SMEs fail to collect their commercial receivables arising from the sales of products and services realized domestically, a significant portion of their receivables are covered by the State Supported Credit Insurance Pool.

 

This system is a type of insurance that guarantees the risk of non-payment of the debt arising from the forward sales that have not been secured. In the current practice, it offers a serious opportunity to SMEs who cannot secure their receivables due to the turnover criteria. Bankruptcy, concordat, liquidation, etc. of a buyer who has been allocated a credit limit. Its default is guaranteed by legal situations.


WHO CAN GENERAL BENEFIT FROM THE GOVERNMENT SUPPORTED TRADE RECEIVABLE INSURANCE?


SMEs meeting the following criteria will be able to benefit from this insurance system.

  • The business must be established at least two years before the insurance application date,
  • The risk assessment criteria determined by the center must be met,
  • Should be a taxpayer other than simple procedure,
  • There should be no tax and SSI debt,
  • Annual net sales revenue in the previous fiscal year is less than 125 Million TL (included),

Businesses will only be able to benefit from the receivables system for trade receivables arising from the sales of products and services to be realized domestically. Credit insurance does not provide coverage for sales made to real persons who do not have the title of Merchant.

 

SALES THAT CAN BE SECURED WITH THE GOVERNMENT-SUPPORTED TRADE RECEIVABLE INSURANCE

 

Guarantee is provided for the following sales with Credit Insurance.

  • If there is a sales contract between the insured and the buyer; against sales for which the term of sale is specified in the contract,
  • If there is no sales contract between the insured and the buyer; Against sales where the term of sale agreed between the insured and the buyer is specified on the invoice (Sales with post-invoice)
  • Except for foreign currency indexed invoices or contracts, against sales whose invoices or invoices are made in Turkish Lira,
  • Against sales to buyers other than public institutions and organizations, municipalities, chambers and commodity exchanges, professional unions, associations, foundations, public economic organizations.

STATE SUPPORTED TRADE RECEIVABLE INSURANCE APPLICATION PROCEDURE

 

The application of the company requesting credit insurance is made by the insurance company or the users authorized by the intermediaries, with the application form, the content of which is determined by the Center and contains the information received without prejudice to the requirements of the Law on Protection of Personal Data dated 24/3/2016 and numbered 6698.

 

WHAT IS COVERED BY THE GOVERNMENT SUPPORTED TRADE RECEIVABLE INSURANCE?


A state-supported credit insurance pool has been established by the Ministry of Treasury and Finance, and a significant portion of SME's receivables will be paid by this pool.

 

Guarantee will be given for sales with maturity up to 120, 180 or 360 days. In the State Supported Trade Receivable Insurance, the invoice term can be a maximum of 360 days. If the insured wishes - if there is no situation where the buyer company should notify any negative information (bad situation of the company, having a bounced check, etc.) - it can extend the maturity up to a maximum of 60 days. (The term extension can be made by adding 60 days to the term specified on the invoice.) The use of the term extension period is optional.


The policy premium amount will be determined according to the total domestic receivables and terms of SMEs. Premiums are paid in 3 installments, 25% in advance. 10% discount will be applied for cash payments.


Within the scope of the system, guarantees are provided for trade receivables arising only from domestic sales. In the Receivable Insurance, the invoices covered by the policy are covered by the insurance provided that they are issued with the policy issuance date. There will be no credit insurance coverage for invoices issued before the policy issuance date.

 

In the State Supported Trade Receivables Insurance System, compensation payment will be made to the insured following the conclusion of the claims applications to be made within 30 days following the waiting period of 120 days.


SETTING CREDIT LIMITS


A guarantee limit of up to 750 thousand lira will be provided according to the turnover generated by the businesses that request credit insurance. The maximum coverage limit may be increased by taking into account the guarantee limit demanded by the company requesting credit insurance for the buyer and risk assessment criteria. This provision will take effect from April 1, 2020.


Medium-sized enterprises with a net sales revenue of 40 million lira or less in the previous fiscal year, as of March 25, 2020, the date of publication of the communique, medium-sized businesses with annual net sales revenues between 40,000,001 and 125 million Turkish lira (included) in the previous fiscal year will be able to benefit from receivable insurance as of April 1, 2020.


The risk assessment of the buyers to be covered under the insurance is made. As a result of the risk assessment, the buyers are ranked between 1 (lowest risk) and 6 (highest risk). A credit limit is provided to buyers with a score between 1 and 5, provided that the maximum credit limit is not exceeded. The buyers that make up at least 50% of the turnover generated by SMEs demanding insurance from term sales and according to the size of the turnover are taken into consideration by ranking them in descending order.


If the requesting SMEs want to make an inquiry before they receive State Supported Commercial Receivable Insurance, they are obliged to pay an investigation fee of 10 TL for each creditor and insured. In case the policy is issued within 10 days from the date of submission of the offer, no inquiry fee is charged within the scope of the offer related to the policy.

 

HOW DOES THE STATE-SUPPORTED TRADE RECEIVABLE INSURANCE PROCESS WORK?


SMEs who want to receive credit insurance service should apply to the insurance companies determined by signing a protcol with the Center (Halk Sigorta, Ziraat Sigorta, Güneş Sigorta, Ak Sigorta etc.). The users are made with the application form containing the information determined by the Center.


An automatic score evaluation is made for buyer companies and a credit limit is allocated. This loan limit allocated can be increased by the center without any additional premium, taking into account the credit limits and risk assessment criteria requested by the Insured for each buyer in the application form. The inquiry fee that will arise during the risk assessment process is covered by the SME requesting the policy. As a result of the evaluations made within the scope of the system, a policy proposal is created by the insurance company.


The net premium and maximum coverage amount to be paid is calculated based on the turnover of the Insured obtained from term sales. For example;


If an SME with a term sales turnover of 4.500.000 TL wishes to insure its 10 buyers of its receivables of 3.500.00 TL arising from its term sales up to 180 days; Since the turnover obtained by SME from forward sales is 4,500,000 TL and the maturity of its receivables is up to a maximum of 180 days, the premium rate to be applied according to the Premium account table effective as of April 1, 2020 is 0.70%. In this case, the premium amount to be paid by the SME is calculated as 31,500 TL (4,500,000 * 0.70%). 5% Expense Tax will be added to this amount. For this amount to be paid, the maximum amount of compensation he can receive will be 315,000 TL (31,500 TL * 10). The maximum credit limit per buyer (since the turnover is 0-5,000.00 TL) will be 100,000 TL.


In case of damage, legal proceedings are initiated by the insured's application to the Center and collection service is provided to the insured.


In the State Supported Trade Receivables Insurance System, the collection of the commercial receivables covered by the insurance company will be carried out by the contracted insurance company. Compensation payment will be made to the insured following the conclusion of the claims application, which will be made within 30 days following the waiting period of 120 days.

Compensation is paid for damage files that cannot be resolved with the collection service. The damage file can be closed by the Center if collection is not possible or the collection costs exceed the receivable amount. Compensation payment will be made when the collection period ends.

 

In addition, with the CB decree dated March 30, 2020, effective from April 1, 2020, the premium rate in insurance contracts concluded on April 1, 2020 - April 1, 2021; When a certain loss / premium rate of risks that cannot be transferred in credit insurance is exceeded, 75% or more for the share that constitutes 50% of the risk remaining above the Extraordinary Risks Management Center, 110% for the share constituting the remaining 50% of the risk covered, and It has been committed that the reinsurance support will be provided by the state.


THE ISSUES TO BE CONSIDERED IN THE COVERAGE OF THE DAMAGE IN THE GOVERNMENT SUPPORTED TRADE RECEIVABLE INSURANCE


While benefiting from the benefits provided by the Insurance policy within the scope of the State Supported Credit Insurance policy, attention should be paid to both the General Conditions of Credit Insurance and the Special Conditions.


Maturity information must be included in the issued invoices. Invoice terms should not be arranged longer than the maximum payment period selected at the time of policy making.


The insured is obliged to take all necessary measures to collect the receivables from the buyers under the guarantee and to prevent or minimize losses.


Since the buyers to whom the insured will start to work for the new period within the insurance period are not considered within the scope of the other coverage in the policy, they should immediately apply to the insurance company and be added to the buyer's list.

 

All kinds of documents requested by the insurance company from the insured must be presented accurately and completely.

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