Credit Guarantee System

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Credit Guarantee System
Korea Credit Guarantee Fund Chanki Park Chief,
International Affairs Team
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• Chapter 1
• Overview of Credit Guarantee System

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Type of Credit Guarantee Program
Type of C.G
Related Liability
Indirect Financing
Guarantee for Bank Loans
Bank Loans, Overdraft account Discount on
Commercial Bills
Guarantee for Payment Guarantees of Banks
Payment Guarantee
Direct Financing
Guarantee for Bond Issuance
Corporate Bond (P-CBO)
Credit Between Enterprises
Transaction Liabilities
Guarantee for Transaction Liabilities
.
Guarantee for Commercial Bills
Notes Payable, Mortgage Bills, Notes Receivable
Others
Guarantee for Performance, Guarantee for Tax
Payment
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Basic Framework

• Guarantee for Bank Loans

? Apply for Credit Guarantee
? Issue Credit Guarantee
Banks
K C G F
Enterprises
? Credit Investigation
? Loans

• Guarantee for Transaction Liabilities

? Supply goods
Buyer
Supplier
? Pay for each transaction
? Apply for Credit Guarantee
K C G F
? Credit Investigation
? Issue Credit Guarantee
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By Type of Guarantee
Guarantee Outstanding
As of June 2007
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Change in Guarantee Composition

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By Industry
Guarantee Outstanding

• By Use

• By Size SMEs takes 99.9

As of June 2007
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Guarantee by Rating

As of Dec 2006
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Growth in Guarantee Outstanding

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Our Guarantee in Economy

• Proportion of guarantee outstanding

• Guarantee Proportion to SME Loans

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Guarantee Outstanding by Amount

By Number of Customers
By Proportion by Amount (billion)
thousand
thousand
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Risk Management

Default and Payment under Guarantee
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• Chapter 2
• Credit Guarantee Procedure

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General Guarantee Procedure
Consultation
Application
Credit Investigation
Credit Evaluation
Issue Guarantee Certificate
1st Step
2nd Step
5th Step
4th Step
3rd Step

• Site Visit

• Checklist
• Rating

• Document
• Review
• Bank to loan

Eligibility Ceiling Pre- investigation
Site Visit
CCRS SBSS SESS
Document Review

• Eligibility
• Ceiling, etc

• Contract
• Fee

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• Visit KODIT branch office
• Bring basic document (F/S, B/C, C/R)

Consultation

• Inquire basic financial data and credit report
• through intranet basic eligibility

Financial manager CEO, Owner, etc.
Company

• About company in general and CEO
• Financial status and prospect of business

Team manager Branch officer
KODIT

• Type of guarantee and rough amount
• Document preparation visiting appointment

Consultation
Company KODIT
Initial Decision-making
KODIT
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Eligibility for Credit Guarantee
Enterprises
Almost all business entities are eligible for
credit guarantees
Ineligible Company - Not in operation - Overdue
in payments of bank loans - Submitting false
document, etc
Ineligible Industry - Financial services,
gambling, certain luxurious restaurants, etc.
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Document Required
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Document Required
Where to Issue
What to Check
Document

• Tax agency
• Registration office

Corporation Registration Certificate

• Actual and lawful right to run the business
• Management organized

• Registration office

Real Estate Registration Record

• Foreclosure records
• Value as collateral

• Company prepares

Company Report

• Detailed information about business

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Application and Pre-investigation

• Application Process

• Check missing document
• Check basic eligibility
• Check debtor

Application Accepted

• Document Review and Pre-investigation

Preview documents customer submitted
Pre- investigation
Preview internal information and previous report
Collect external data and reputation, etc
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On-site Investigation
What and How to Check
Criteria

• Devotion for the business, personality,
• Experience, know-how and capability

Interview CEO or Owner

• Bank account, cashbook, transaction record
• Management of A/R, A/P

Budget and finance management

• Document for sales, order, tax payment, suppliers
  and buyers, etc.
• Factory, facilities, product, employee, etc.

Operation and Prospect of Business

• Fraudulent sales and registration document
• Fraudulent factory or office
• Hidden owner with delinquent or bad credit

Other Checkup
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Framework of Investigation Report
Category
Constituent
Overview, Management
Outline, history, subsidiary
CEO, Management, Shareholders
Main office, Production, Operation
Factory, facilities, Product and quality
Suppliers and buyersOrder, Sales trend
Monetary Transaction
List of Debt, Collateral Overdue history and
list, default history
Financial Statement
Balance Sheet, Income Statement, Schedules of
cost of goods manufactured, Financial ratio
analysis, etc.
Opinion, Rating
Rating result
Opinion of investigators
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Guarantee Amount Determination

• How much we guarantee?

Company Request
Sales
Equity
Amount needed
Sales x 25 Sales x 50
Sales x 25 Sales x 50
Shareholders equity x 3

• Ceiling (For each company)

? Up to US 3 million ? Up to US 7 million
including special guarantee programs
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Credit Evaluation
What and How to Check
Criteria

• Ceiling
• Limit by Rating, Sales, Equity

Limit Check

• What kind of terms bank want?

Terms of Loans

• Common Checklist (Violation or not)
• Rating, Cash-flow, Firm Value

Credit Checklist

• Propriety of loan and guarantee
• Analyze firm and default probability etc.

Evaluation opinion
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Approval

• Common Approval Process

Assistant
Team Manager
Branch Manager
On-site investigation Evaluation Report (Rating)
Shareholders equity x 3
Final decision-making
Regulation and Error check-up
Approve or Reject

• Special Level of Decision-making

• Low rating score
• Amount higher than branch limit
• Without guarantor required

Headquarter Approval
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Contract Issuance

• Concluding guarantee contract

KODIT
CEO Guarantor
Company
Contract
Management Guarantor

• Guarantee Certificate

Guarantee Contract Paying of guarantee fee
Guarantee Certificate
Loan
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Fee and Coverage Ratio

• Guarantee Fee Ratio

Rating
Add
Subtract
Determination
0.7 2.5
0.10.4
0.10.3
0.5 3.0
Basis rate
Long-term user Excessive user
Innovative Co Low risk gutee
Bottom 0.5 Ceiling 3.0

• Coverage Ratio

• Share risk with banks, but too complex
• Standard coverage ratio
• 50 90 (at their rating)
• Average coverage ratio 83 (2007)

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Thank you !!
Korea Credit Guarantee Fund International Affairs
Team Tel [phone]