Cabinet helps with supplier credit

Many companies such as shops and catering establishments in the SME segment are supplied on the basis of supplier credit. This means that a supplier insures himself against the risk of non-payment. The corona crisis is creating problems here. To prevent this from happening, the government intervenes and reinsures the supply contracts, up to a total of EUR 12 billion. This maintains confidence in the provision of supplier credit and supplies companies.

Secretary of State for Finance Vijlbrief: "The government is very concerned to prevent people and companies from falling victim to the corona crisis. Because the government guarantees part of the risks, we ensure that confidence in the market is maintained, suppliers can continue to supply their products, and companies can remain in business".

System operation

Many companies such as shops and catering establishments are supplied on the basis of supplier credit. Companies have 30 or 60 days to pay their products to the supplier. A supplier takes out insurance in case of unexpected non-payment.

This is made possible by the fact that short-term payment terms are insured by credit insurers.

On an annual basis, more than 200 billion euros in deliveries are thus made possible between Dutch suppliers and their customers. In the current times, insurers are faced with increasing payment risks and may reduce or withdraw the insurance limits granted to businesses. This could affect 75,000 companies.

After proper consultation with the parties involved, reinsurance for the entire year 2020 will come into effect quickly, so that lenders will not be forced to lower their limits to 0 in the short term.

It is currently estimated that the guarantee required for this will be approximately EUR 12 billion. On the basis of an initial rough estimate, the expected damage to the government amounts to approximately EUR 1 billion. This takes account of the fact that the premiums will go to the government.

Example

Supplier de Grutter of fruit and vegetables supplies 100 restaurants every month. These restaurants then reimburse the Grutter within 30 days. In case a restaurant does not pay back, Grutter insures itself. In the current coronation times, however, restaurants have no income to pay the Grutter. At the same time, when the restaurants open again, they will want to buy (on credit) fresh fruit and vegetables. The current insurers are reluctant to do so. To make sure that deliveries to businesses do not come to a standstill, the government will now guarantee these credits, and the market will continue to function because the Grutter will supply fresh fruit and vegetables when the restaurants reopen.  

In conclusion

The measure has yet to be worked out in detail, and the European Commission, for example, has yet to be asked for authorisation. Similar measures are being prepared in other European countries. The Court will be informed about this shortly.

The above proposal is part of a package of additional measures to support entrepreneurs because of the economic consequences of the coronavirus that Minister Wiebes and State Secretary Vijlbrief and Keijzer have sent to the House, including for SMEs and start-ups and scale-ups.

More information: rijksoverheid.nl