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During the credit vetting process of granting a new credit facility or additional credit amount to the customer, you might notice from the Application Form that a particular customer belongs to a group of companies. You might find that the credit standing based on all your financial and non-financial ratios on this stand-alone company might not qualify it for new or additional credit facility from your company.

So what can you do as a Credit Manager?
Attached below is a sample of a Corporate Guarantee that you might be able to use to persuade the customer to bring forth to its holding company to guarantee the amount of credit given by your company.

This Corporate Guarantee acts as a sort of “collateral”.

When the subsidiary company whom you have granted the credit facility fails in its obligations to pay, your company can then have the recourse to seek payment from the customer’s holding company which has a higher or better credit standing.

More often, nowadays, a holding company normally uses its management company or a special vehicle company (for example, a realty company for a special project) to obtain credit facilities from its suppliers.

Once this Corporate Guarantee has been signed and a Board Resolution raised, this might hopefully make them aware that your company is a bit “more special/preferential” than its other unsecured creditors.

Continue reading Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies