Mercedes-Benz Türk AS was looking for a solution that would provide funding for its network of 30 dealers, which are required to hold a certain level of stock vehicles. “Based on the sales volumes, the dealer itself has to keep such vehicles in stock in order to offer availability and diversity to its customers,” says Erhan Karakas, Finance Manager. “This can only be afforded by high credit lines.”

Variations in the dealers’ financial strength meant that some dealers were able to secure better financing conditions than others. Meanwhile, Mercedes-Benz was required to work with each of the individual dealers’ banks, 15 in total. This complicated the collection process and kept operational costs high.

Mercedes-Benz Türk was therefore looking to work with a single partner bank to provide dealers with lower-cost financing, while reducing overall cash management costs and generating synergies on the basis of the company’s large sales volume.

“It was clear that credits would not be secured by any additional collateral of any dealer,” explains Karakas. “Buy-back guarantees and surety were also not in compliance with our corporate policies. Therefore, the system had to be based on the vehicle itself as collateral to the bank.”

Finding no existing solution to match its needs, Mercedes-Benz Türk selected Garanti Bank as its partner bank. Garanti Bank developed a simple web-based solution which defines credit limits for each dealer and allows stock vehicles to be used as collateral on the basis of a technical document, known as a ‘certificate of conformity’ (COC).

“Despite the financial crisis, the dealers have been able to secure credit at advantageous rates and are able to purchase more vehicles from distributors than previously.”

This has to be delivered to the Traffic Registration Office in order to obtain the vehicle’s licence papers. “If a dealer decides to buy a vehicle by opening credit, we keep the vehicle’s COC and do not deliver it to the dealer until the related credit is closed,” explains Karakas. “When the dealer sells the vehicle to the customer, he pays back the credit and we release the COC.”

Using the new solution, Mercedes-Benz Türk uploads vehicle data to Garanti Bank. Dealers can then access their account at Garanti Bank and accept either a cash payment or a bank credit. Each credit has a maturity of 180 days, giving the dealers ample time to sell the stock vehicles.

Once Mercedes-Benz Türk has received a status report from Garanti Bank stating that either the cash payment has been received or a credit has been paid back, the COC is released. Meanwhile, e-banking statements sent by Garanti Bank integrate automatically with Mercedes-Benz’s accounting systems, enabling invoices to be issued.

This innovative solution, the first of its kind in Turkey, has brought advantages for all parties. Mercedes-Benz Türk’s dealer network is now using five times the credit volumes used at the outset.

Despite the financial crisis, the dealers have been able to secure credit at advantageous rates and are able to purchase more vehicles from distributors than previously, increasing sales opportunities.

Mercedes-Benz is now working with just one bank, reducing operational burdens and increasing the accuracy of cash flow forecasts. Garanti Bank, meanwhile, becomes the sole bank to benefit from Mercedes-Benz’s €1.2 billion dealer sales turnover flow and benefits from increased transactional opportunities with both Mercedes-Benz and its dealers.