THE ECHO - Ferrostaal

SUPPLIER CREDIT OFFERS LOWER INTEREST RATES
SIMPLE AND INEXPENSIVE
Supplier credit is very common in Latin America in particular, and customers often ask about it in the context of machine deliveries.
With supplier credit, the supplier grants the foreign customer a term of credit. In this way, the customer avoids impacting its credit
limit at its bank and enjoys considerably lower interest rates.
Supplier credit has several advantages to offer customers
purchasing goods and services. The euro and US dollar interest
rates are considerably lower than annual interest rates for local
currencies, which may be anything up to 30 percent (in Brazil, for
example). In addition, it takes much less time to sign an agreement
on payment terms than to do all the necessary paperwork to
secure a bank loan. By safeguarding the due receivables with supplier
credit insurance cover, MAN Ferrostaal ensures that customers do
not have to worry about the debt during the normal course of
business.
However, customers cannot escape some administrative charges
if they avail of supplier loans. For credit assessment purposes, for
example, customers must present up-to-date, audited balance
sheets and profit and loss statements to the supplier and, if the
loan is backed by (tangible) collateral, they must cooperate for the
entire term of the loan.
Cash payment agreements are always preferable. For MAN
Ferrostaal, supplier credit offers few advantages because the
granting of loans and keeping track of debt always means high
administrative costs. Moreover, supplier credit has a negative
impact on MAN Ferrostaal’s balance sheet ratios.
Karl-Heinz Schröter
THE ECHO 1/2006 57