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When Was KGF Founded? What Does It Do And What Is The Purpose Of Its Foundation?
KGF was founded by Cabinet Decree numbered 93/4496 and dated July 14, 1993. It started its activities by granting its first guarantee in 1994.
As a guarantee institution, KGF provides access to finance for those Small and Medium Sized Enterprises (SMEs) that can’t benefit from bank loans due to insufficient collateral, by assisting them as a “joint guarantor“.
As noted in the relevant Cabinet Decree, KGF was founded to ease access to finance for small and medium sized enterprises, farmers, merchants, craftsmen and self-employed entities in need of collateral in terms of credit worthiness, and in accordance with this purpose it was exempted from taxes and dues.
What Is a Sme?
These are enterprises described in various provisions of the “Regulations on Definition, Qualifications and Classification of Small and Medium Sized Enterprises” with the Cabinet Decree numbered 2012/3834 and dated 10.09.2012.
In general, SMEs are enterprises that employ less than 250 people annually and whose either sales revenue or financial balance sheet does not exceed TRY 40 million.
Is KGF a Public Instutıtıon?
KGF is a joint-stock company founded in accordance with Turkish Commercial Code. Its shareholder include public entities and entities considered to be public such as KOSGEB (Small and Medium Industry Development Organization), TOBB (Union of Chambers and Commodity Exchanges of Turkey), TESK (Confederation of Turkish Tradesmen and Craftsmen), Halkbank, Ziraat Bankası, Vakıfbank, Eximbank and Ziraat Participation Bank Remaining shareholders are Akbank, Albaraka Türk Participation Bank, Alternatifbank, Denizbank, Burgan Bank, Finansbank, HSBC, ING Bank, Kuveyt Türk Participation Bank, Şekerbank, Türk Ekonomi Bankası, Garanti Bankası, İş Bankası, Türkiye Finans Participation Bank, Yapı ve Kredi Bankası and MEKSA (Foundation for the Promotion of Vocational Training and Small Industry) and TOSYÖV (Turkish Small and Medium Enterprises, Self-Employed People and Executive Foundation).
Whıch Loans Does KGF Provide Guarantees For?
Guarantees are granted for any cash and non-cash loans that enterprises need for operation and investment financing, excluding personal loans, consumer loans, checkbook loans and corporate credit cards.
Is There Any State Support Provided To KGF?
Universally, since services provided by guarantee institutions are for the public good, they have always been institutions supported by the state. In this regard, KGF is excepted and exempted from stamp taxes, corporate taxes and certain fees. Besides, presence of public entities in its shareholding structure should be considered part of the state provided to KGF. In addition, fund of TRY 2 billion provided to KGF by the Secretariat of Treasury with the Cabinet Decree numbered 2009/15197 in order to fend off the negative effects the global economic crisis and instability is another significant state support. The said fund was raised up to TRY 2 billion with the “Regulations on Amendment to the Certain Laws and Legislative Decrees” numbered 6637 and dated 27.03.2015.
What Is The Standard Operation In KGF Guarantee Scheme?
It does not have standard guarantee scheme. KGF has – along with the guarantee schemes financed by its equity capital – guarantee schemes dependant on the funds provided by other institutions and organizations such as the Secretariat of Treasury, Baku-Tbilisi-Ceyhan Pipeline Project Co. (BTC Co.) and EIF (European Investment Fund).
For example, in guarantee extensions dependant on Secretariat of Treasury support, KGF bases its evaluation on the credit worthiness rating done by the bank itself and does not conduct further evaluation of the subject SME within KGF. KGF makes its final decision by considering bank requests in terms of credit worthiness. In contrast, in guarantee extension dependant on equity capital, KGF evaluates credit worthiness of SMEs through its own specialists in addition to the banks’.
In Portfolio Guarantee System (PGS), on the other hand, KGF does not partake in the decision making process. Banks have complete loan extension autonomy with KGF guarantee in this regard. For guarantees granted through EIF and BTC support, relevant protocols made with the corresponding institution and organization are taken as a basis..
Besides, risk share rates and guarantee limits may vary depending on the support types.
Are There Any Other Institution Like KGF In Turkey?
KGF, making use of the examples of guarantee institutions operating in Europe, is the only institution in Turkey that provides guarantees to SMEs in order to ease their access to finance.
Who Can Benefit From KGF Guarantees?
Real and legal entities defined as SMEs which have credit worthiness before the banks but experience difficulties to access to finance due to insufficient collateral, may benefit.
Can Merchants, Craftsmen And Self-Employed Persons And Farmers Benefit From KGF Guarantee?
Merchants, craftsmen, self-employed persons and farmers can benefit from KGF guarantee since they are considered SMEs.
Does KGF Grant Guarantees To Cooperatives?
KGF provides guarantees – excluding construction, plot and building cooperatives – to associations and cooperatives belonging to associations.
Does KGF Guarantee The Whole Loan?
KGF guarantees through banks are partial since KGF works with banks based on a risk sharing principle. In schemes involving TÜBİTAK, KOSGEB, TTGV and Eximbank, however, KGF grants complete guarantees.
For public support programs to SMEs by institutions like TÜBİTAK, KOSGEB and TTGV and loans extended directly by Eximbank, KGF provides complete guarantees over the support/loan amount, on condition that it does not exceed the guarantee limits.
In contrast to that, KGF works with banks on a risk sharing principle and guarantees only a certain percentage of the loan. Since KGF depends on the bank’s initial evaluation of the credit worthiness of the SME, it predicates the bank to share some of the risk for the loan extended.
Is There An Upper Limit On KGF Guarantee Amounts?
KGF guarantee limits vary depending on the type of support.
In terms of guarantees provided from equities of KGF, the guarantee upper limit per SME is TRY 1 million. However, in guarantees to be provided exclusively or additionally for Eximbank export loans, the maximum guarantee limit per SME may increase up to TRY 2 million.
In letters of guarantee to be issued addressing institutions such as TÜBİTAK, KOSGEB and TTGV, the upper limit is restricted with the guarantee limit to be provided per SME from KGF equities.
In guarantees provided within the scope of fund granted from the Secretariat of Treasury, the maximum guarantee limit per SME is TRY 1.5 million.
CAN A SME BENEFIT BOTH FROM KGF EQUITY AND TREASURY SUPPORT?
Dependant on its credit worthiness, a SME can benefit from KGF equity guarantees and Treasury supported guarantees within the limits set.
IS THERE A MATURITY DEADLINE FOR LOANS GUARANTEED BY KGF? DOES KGF GRANT INDEFINITE GUARANTEES?
KGF sets guarantee maturity according to loan maturity. There are also arrangements which guarantee maturity is indefinite; and such arrangements are pursuant to the time indicated on letter of guarantee loans, tender specifications and certain contracts with the management. However, in treasury supported funds, there are guarantee for maturity loans with at least 6 months and at most 8 years.
IS THERE A DEADLINE ON WHEN THE GUARANTEE GRANTED BY KGF CAN BE USED?
Guarantee granted by KGF must be used within 6 months for Treasury supported guarantees and within 1 year for equity supported guarantees, on condition that the firm preserved its credit worthiness during this time.
IS THERE A LOWER LIMIT FOR GUARANTEE APPLICATIONS TO KGF?
There is no lower limit in KGF guarantees.
GIVEN THE SUM OF GUARANTEES DOES NOT EXCEED THE GUARANTEE LIMIT; CAN SMES APPLY FOR DIFFERENT GUARANTEE AMOUNTS AT DIFFERENT TIMES?
A SME has the option to use the guarantee granted to it all at once or part by part within the guarantee usage period. Besides, a SME can demand the top guarantee limit part by part in time as needed or all at once right away.
DOES KGF ONLY SUPPORT PROJECTS? DOES IT GUARANTEE OPERATING CAPITAL LOANS?
KGF grants cash or non-cash guarantees for both investment and operating capital loans.
CAN SMES THAT OWE TAXES AND SGK (SOCIAL SECURITY INSTITUTION) PREMIUMS APPLY FOR KGF GUARANTEES?
Different policies are implemented in terms of outstanding taxes and SGK premium when evaluating credit worthiness for guarantee. In Treasury support guarantees, it is required that it does not have overdue taxes and SGK premiums. However, on guarantees supported by equities, they do not cause an automatic dismissal of applications since overdue taxes and SGK premiums are evaluated in terms of their significance in the overall balance sheet.