On the one hand there is a high demand for modern production equipment in Russia, whereas on the other hand it is rather difficult for large non-state businesses, and even more so for medium - and small sized companies to obtain credit. The most difficult obstacle is to present security. According to common practice the volume of security should be twice higher than the amount of credit. And not every security will be accepted by the bank. After the crisis of 2008/2009 Russian bankers try not to take as security plots of land and buildings of old shops – all this will be difficult to turn into cash. But the enterprises have plenty of such property. In case the enterprise has not got liquid security, it is practically impossible for such a company to get credit from a Russian bank.
Even if the banks are willing to give credit, the loan interest rates are rather high. The credit interest rates offered by Russian banks are generally often not less than 13 percent p.a., but the maximum rate can even reach 22 percent or higher.
Now the company is an independent subsidiary of one of the largest German industrial enterprises – the corporate group ThyssenKrupp – acting as a universal trader using the resources of the parent company and having the right to sell the products from any manufacturer all over the world. Headquarters of the company are located in Essen, Germany. The company has representative offices in about 60 countries including Russia.
So what is the competitive advantage of OTTO WOLFF in such a situation? We deliver to Russia the equipment and materials with deferred payment up to 360 days. Such shipments are done under the export promotion program of the German government, represented by the export insurance agency EulerHermes. Goods of German origin are preferable, although the general contract of OTTO WOLFF also allows inclusion of goods manufactured in other European countries, as well as America and Asia.
All deliveries will be effected in the name and for the account of OTTO WOLFF. The only document needed is the commercial contract, signed by both partners, whereas the good name of the customer is the only security to be provided. The costs for the service vary, depending on the kind of the product, its origin, the time of production, etc.
1. The Russian enterprise interested in the purchase of foreign equipment or materials with deferred payment submits to the OTTO WOLFF branch office in Moscow the following documents:
– copies of unclassified financial documents of the company with a stamp of tax administration: balance sheet (blank No.1) and profit and loss report (blank No. 2);
– a short description of the project or necessary equipment.
2. Based on these documents OTTO WOLFF independently applies for insurance cover from the German state agency EulerHermes, the amount of this cover being defined by analyzing the submitted financial documents.
3. OTTO WOLFF submits to the Russian enterprise the commercial offer for delivery of requested equipment with deferred payment up to 360 days after the delivery date (for materials – up to 180 days after the delivery date).
4. Having agreed all questions the Russian enterprise signs with OTTO WOLFF a direct foreign trade contract for delivery of selected equipment or materials.5. The equipment is produced and delivered to the Russian enterprise, which pays for it according to the signed contract not later than 360 days after the delivery date.
Another important point is the delay of payment up to 360 days after the date of delivery of the goods. In this case the production time (which can be as much as a year or more for industrial equipment) is automatically added to the delay of payment. The OTTO WOLFF system is a big advantage for the Russian client, especially in comparison with a bank credit where one has to effect the first payment to the producer long before the equipment is delivered, while with us it would be within a year after delivery. As you say in Russia, feel the difference. Even if it takes 4 – 5 months to install the equipment, the rest of the time can be enough to earn enough money to repay if not all the debt, but a considerable part of it.
For our long-time and reliable customers in Russia we also offer long-term projects, when the time of deferred payment for the equipment can be extended to 7 years, while the total value can amount to EUR 50 – 100 Million. Specific terms and volumes of provided funds are basically defined by the financial state of the Russian enterprise. In respect of the 360 days credit for the long-term credit, technically two contracts are signed: A commercial contract for delivery of equipment (between Russian enterprise and OTTO WOLFF under insurance coverage from EulerHermes) and a long-term credit contract to pay for this delivery (between the Russian enterprise and a German / European bank – a bank introduced to the Russian client by OTTO WOLFF). The interest rate for this long term credit is currently less than 4 % per year!
1. No advance payment is necessary;
2. No pledges, guarantees, vouchers or any other securities are necessary;
3. The payment delay time automatically includes the production time for the goods (thereby for complex equipment total payment delay may exceed two years or more);
4. After delivery the equipment will produce profit for the buyer, even before the payment for the equipment is due.
Considering the range of delivered equipment, there are no strict limitations – we respond to the customer’s demands. In many cases the manufacturer and the buyer discuss everything at an industrial fair, select the components of the equipment, define the general cost, and only then go to OTTO WOLFF. It is a favourable situation for us: the customer knows the exact technical specification and average cost of the contract. But I would like to stress one thing: OTTO WOLFF can sign the contract only with the manufacturer’s parent company and not with its Russian dealer.
During the last few years, we have supplied machinery, equipment and materials practically to all leading Russian industry sectors, such as the car industry, metallurgy, mechanical engineering and machinery building, mining and coal industries, oil and gas industry, refineries, aircraft industries, shipbuilding, agriculture sector and many others.
1. There may be an advance payment for purchased equipment – 20 percent or more, paid out of the resources of OTTO WOLFF;
2. OTTO WOLFF as a subsidiary of ThyssenKrupp accepts all political and commercial risks for business with Russia; for the manufacturer it is a core German business
3. On request it is possible to submit a corporative guarantee of ThyssenKrupp corporate group.
Among our customers using our commodity crediting services there are big Russian enterprises like MMK, AvtoVAZ, Tagmet, Uralmash, Gazpromcentrremont, Belon, Bamtonnelstroy, leasing companies, etc. Medium-sized business among our customers are companies like VPK-Oil (Novosibirsk), Metrostroy-PTS (Ekaterinburg), Tsentralnoye konstruktorskoye buro avtomatiki (Omsk), Mostochlegmash (Moscow), SOATE (Stary Oskol), Denit (Tjumenj), Linar (Nevinnomyssk) and many others.