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Administration Guide - Credit Limits
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Must I apply for credit limits for all my customers in the countries shown in the Annexure A to my policy?
Yes, if you have an all-markets policy. If you have elected to cover selected countries only, then you need only apply for limits on customers in those countries. In both instances you need not apply for limits if -
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the customer always pays with order or by means of an irrevocable letter of credit confirmed by a bank in South Africa, or
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the customer always pays by means of an irrevocable letter of credit, payable against presentation of documents, which is not confirmed by a bank in South Africa, provided the policy carries a special condition to the effect that shipments payable on such terms of payment are specifically excluded from the cover of the policy.
When must I submit an application form for a credit limit?
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When your policy is issued, you must apply for credit limits for all existing customers for whom credit limits are required for amounts above the limit of discretion.
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Credit limits should be requested for new customers as soon as the first contact is made even if it is not certain that a sale will result. In this way you not only help us, but you automatically get a credit and status check on potential customers.
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If the amount for an existing limit is insufficient, you must apply for increased cover.
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Where credit is granted to governments, government departments or other public buyers, you must always apply for a credit limit even if the amount required is less than your limit of discretion.
What information do I need to apply for a credit limit?
All details requested on the credit limit application form (see link) 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 amount must I ask for when I apply for a credit limit?
The credit limit asked for should reflect the maximum amount owed or likely to be owed by the customer concerned at any one time, for example:
Buyer X buys goods to the average value of R10 000 from you every month. He pays at 60 days. The maximum amount outstanding at any one time should therefore be approximately R30 000, bearing in mind that by the time the fourth order is dispatched, you should have received payment for the first.
Is there any danger in applying for unrealistically high credit limits?
Yes. If you apply for amounts that are completely unrealistic we may issue a "nil" limit instead of a lower limit which the buyer's financial position would justify. For example:
If a limit of R100 000 were applied for and we felt R5 000 was all we could grant, we might issue a "nil" limit because it is meaningless to issue a limit that has no relationship to the level of business contemplated.
Must I apply for a new credit limit for each new order by a customer?
Normally not, as long as the outstanding balance plus pending shipments do not exceed the value of the credit limit held
A credit limit is "revolving" and as payment for earlier shipments is received, the credit limit becomes valid for further shipments. It remains in force for the life of the policy or until superceded by a limit of a later date or until we withdraw it.
In certain rare cases, however, limits are approved for specific transactions only and you must apply for a new limit for each subsequent transaction.
When applying for an increased limit, must I stipulate the entire amount needed, or just the increase?
The application form must show the entire amount of the new limit needed, not only the amount of the increase.
How will I be told of the limit granted?
If we can cover the amount you requested (or a lesser amount), we fax you a "credit limit annexure" showing the name of the insured buyer (customer) and the amount of the limit granted. If we cannot cover the buyer at all, we will fax you a "nil" limit showing that that is the case.
Please note:
- If we issue a "nil" credit limit with comment E on a buyer, it means that you will also not be able to establish cover under your limit of discretion.
- We can issue a credit limit for an amount less than your limit of discretion.
In such a case you will only be covered up to the amount of the credit limit.
Will my experience with a buyer be taken into account?
Certainly. If we are unable to approve the credit limit you require on a particular buyer, you should re-approach us if you feel there are special circumstances, based on your past experience with the buyer, which we should take into account when assessing the risk.
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