GENERAL FINANCING AVAILABILITY
Traditionally, Turkish corporations have satisfied most of their financing requirements through the banking industry. Corporation / banking relationships are close. Locally, commercial banks account for about 80 percent of the credits outstanding in the Turkish financial system. However, given the continuing gap between Turkey's extensive needs and its limited internal resources, external financing of public and private project investment will be a crucial factor in this and coming years. Because of high inflation and high public-spending requirements, the cost of local currency funds is very high. Exporters are advised to provide financing for their exports. In addition to short and medium-term credits available from commercial banks in local and foreign currencies, lower-cost TL credits are also available from Turkish Eximbank.
HOW TO FINANCE EXPORTS AND METHODS OF PAYMENT
Letters of Credit (LCs) are traditional import instruments for private-sector transactions. LCs should be irrevocable and confirmed by a prime U.S. bank. As Turkish importers develop long-term contacts and prove their credit-worthiness, suppliers may be willing to accept documents against payment (d/p) or documents against acceptance (d/a). Deferred payment schedules are not common except in cases of large transactions where supplier financing plays a role.
Turkish banks continued to have seen some tightening in their access to international credit, though the major banks are able to borrow internationally. Suppliers should consider unconventional project financing packages (e.g., forfeiting, factoring and utilization of third-country export credits) when bidding on major government infrastructure projects. Exporters should be flexible and try to accommodate customers' needs, building any additional associated cost into the offer price.
Firms bidding on GOT contracts should pay careful attention to the way proposals are prepared and should strictly follow the administrative specifications. Financing costs and foreign exchange rate risks, wherever applicable, should be factored into the bid price. Bids, which do not comply with administrative specifications (which include financial criteria), are generally rejected. Generally, validity of a proposal is required to be 3 to 6 months from the bid date. Government tenders often involve bid and performance bonds. Bid bonds are normally equivalent to 3 percent of the value of the tender, while performance bonds are usually equivalent to 6 percent of the contract value. The government only calls these bonds in cases of substantial non-performance. All bonds have to be counter-guaranteed by a Turkish national bank.
A number of leasing companies operate in Turkey, most owned by Turkish banks. They finance purchases of expensive capital goods such as aircraft, auto fleets or special equipment. Financial leasing used to account for only 1 to 2 percent of capital expenditures in Turkey versus 20 percent in developed countries. The terms of leasing are usually four years, with a balloon payment at the end. Turkish leasing companies are eager to work with U.S. counterparts.
Turkish factoring companies (again, usually offshoots of banks) generally belong to the International Factors Group based in Belgium. Like leasing companies, all factoring and forfeiting companies are having funding difficulties. Both factoring and forfeiting maximize cash flow, reduce transaction risks, and may enhance competitiveness by offering flexible payment terms to the buyer. All U.S. banks active in Turkey know and deal with at least one of the major leasing and factoring companies.
TYPES OF AVAILABLE EXPORT FINANCING AND INSURANCE
The Export-Import Bank of the United States (Eximbank) is open for business in Turkey and offers a variety of credit facilities to U.S. firms exporting to Turkey as well as providing project financing for U.S. investments. Eximbank does not have a ceiling for Turkey as long as a Treasury guarantee is provided (for the public sector). For the private sector investments, Eximbank considers the financial records of the Turkish company or the ability of a project to generate enough revenue to pay back the loan. The U.S. Trade and Development Agency (TDA) is active in financing pre-feasibility and feasibility studies and pre-design work for major government projects and private sector projects, while the Overseas Private Investment Corporation (OPIC) insures and provides investment credit financing to many U.S investments in Turkey. U.S. firms may also compete for contracts financed by the World Bank. Most major government tenders still require suppliers' credits.
In 1999, the Export-Import Bank of the United States (Ex-Im Bank), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency (TDA) opened the Caspian Finance Center (CFC), the agencies’ first joint regional office anywhere in the world. Located at the United States Embassy in Ankara, the CFC houses representatives from OPIC and TDA who promote increased trade and investment in Turkey, the Caucasus and Central Asia. Working together with the U.S. Commercial Service and the Department of State, the Center’s efforts also focus on supporting American participation in projects throughout the region and Afghanistan.
USDA’s Commodity Credit Corporation offers three-year GSM-102 export credit guarantees for imports of a wide range of agricultural products. Seven-year GSM-103 guarantees are available for imports of breeder cattle and poultry. In October, 1998, USDA announced Turkey’s eligibility for a five year Facilities Credit Guarantee Program for sales of U.S. manufactured goods and services to improve existing agricultural related facilities and a USD 5 million Supplier Credit Guarantee Program targeted at imports of high value products from the United States.