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Administration Guide - Credit Limits
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What is a credit limit?
It is the maximum amount insured on a particular buyer that will be covered in terms of the policy.
Why are credit limits required?
Since we are carrying the majority of the payment risk, it is not unreasonable that we should be able to exercise some control over the amount of credit we insure for individual buyers. It also protects your own interests, because you carry the balance of the risk.
How do I obtain a credit limit?
In one of three ways:
- By making use of Cregalink our online interactive service
- By establishing a limit under your limit of discretion.
- By applying to us for a credit limit, using the credit limit application form
 Click here to view the form
What is a "limit of discretion"?
A limit of discretion is the maximum amount of credit that you may grant an individual buyer, under the cover of your policy, without first obtaining our approval.
The limit of discretion that you enjoy is shown in the schedule to your policy.
Why does a policy have a limit of discretion?
It would be very time-consuming, both for you and us, if in terms of the policy you had to apply to us for the approval of credit granted to each and every buyer, regardless of the level of credit required. The limit of discretion therefore reduces the administration required and enables you to reply promptly to an initial request for credit from a customer
How can I approve a limit under the limit of discretion?
You will be able to do this provided that:
- You have a written bank report (not older than six months) on the buyer, giving a code A, B or C for an amount not less than the limit established by you and provided that the bank code does not evidence any previous cheques having been returned "refer to drawer". This code may be obtained by making a request to your commercial banker
- Or by your favourable trading experience with the Buyer over an immediately preceding period, of not less than twelve months, evidenced by a satisfactory payment record involving at least four separate month’s purchases.
The limit under your limit of discretion must have been validly established in terms of the above before any new delivery is made.
When must I apply for a credit limit?
- Upon the issue of your policy, when application must be made for credit limits on all your existing buyers who fall within the cover offered under the policy structure and who owe (or are likely to owe) more than your limit of discretion.
- As soon as the first contact is made with new buyers who fall within the category of accounts which are covered under the policy and who are likely to owe you more than the limit of discretion. In this way, you can obtain an early check on the creditworthiness of potential buyers.
- If an existing credit limit is too low to cover amounts owing to you by any buyer, then you should apply to us for an increased credit limit as soon as possible.
Failure to offer all qualifying buyers may impact on the payment of claims. If you are uncertain as to which buyers should be offered for cover or if you require a copy of the policy document, please contact us and this will be delivered to you at no charge.
What amount should I ask for when I apply for a Credit Limit?
The amount should reflect the approximate amount owing or likely to be owed by the debtor at any one time.
How long does it take for a Credit Limit to be approved?
About 80% of all Credit Limit Annexures (Approvals) are issued by us no later than one week after the application has been received. The remaining 20% are delayed due to factors beyond our direct control including lack of information or inadequate information.
What information do I need to apply for a credit limit?
All details requested on the credit limit application form (see link above) are required for each application.
The processing of your request for a credit limit may be delayed if your application form does not contain all the information requested.
What happens in response to a Credit Limit Application?
The value and terms on which we are prepared to offer cover is stipulated on a Credit Limit Annexure which will be sent to you. Alternatively you may view the same information on Cregalink. Please have regard for any special condition reflected on the Credit Limit Annexure as well as the comment. A key to the comment may be found on the reverse side of the Credit Limit Annexure.
What happens when I need a credit limit decision very urgently?
Use our paid response system to obtain an urgent credit limit decision. The rapid response system can only work properly if you give us the full details (including trading styles) of the buyer and his bankers. Applications should be faxed to use, clearly marked "urgent". Unmarked applications will be treated as normal (i.e. non-urgent).
What happens if we trade in excess of the value stipulated on the Credit Limit Annexure
This will effect the calculation of the indemnity in the event of a claim.
Are Credit Limits Necessary for Public Buyers (i.e. municipal regional or central government departments)?
No because the cover under your policy does not extend to deliveries made to the government or government agencies.
Are Credit Limits necessary for your own subsidiaries or associated business?
No these are not insurable under your policy and are excluded from cover.
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