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Credit policy relating to timber sales

It is Forestry Commission policy to offer credit to those customers who request it, subject to the customer's creditworthiness being established. Customers granted credit are required to pay for goods before the end of the month following the month in which the goods were collected or despatched from the forest.

Before any customer is formally offered credit facilities an assessment of the customer's Creditworthiness will be carried out to establish the maximum level of risk to which the Forestry Commission should reasonably be exposed. Credit will then be offered up to but not exceeding the maximum level of risk. The amount of credit offered will also reflect the level of trading. Responsibility for carrying out assessments of creditworthiness and the subsequent offering of credit facilities lies with the Forestry Commission Credit Manager. Harvesting and Marketing Officers have discretion to offer credit for one-off sales not exceeding £800 in value, where they are satisfied that the purchaser is creditworthy.

A customer seeking credit from the Forestry Commission for the first time should obtain an 'Application to Open a Credit Account Form' from a Country Director or the Credit Manager, and complete and return the form. New customers successful at auctions and tenders will, if they have not already requested one, be given an application form but advised that until a credit limit has been approved they will have to pay in advance, or on credit only if supported by a bank guarantee.

Upon receipt of a completed application form an assessment of the level of creditworthiness will be carried out by the Credit Manager. A request for credit from any customer, even one who has not traded with the Forestry Commission recently or at all, will be considered provided the customer has been in business sufficiently long to enable a reliable assessment of risk to be made. An assessment will involve examination of the following :

  • a. where the level of credit is unlikely to exceed £10,000:
    • bank reference
    • local background report from any Forest District staff who have knowledge of the customer
    • credit agency report.
  • b. where the level of credit is likely to be £10,000 or more:
    • as for a. above plus company accounts, which should not be more than 12 months old.

From time to time applications for credit are received from newly formed businesses who do not have a trading record of sufficient duration on which to base reliable assessments of risk.

Provided a satisfactory bank reference and local background report have been obtained a credit facility of up to £2,500 may be offered without security. It will be a requirement that any offer of credit above this level be secured against a bank guarantee. Upon receipt of certified accounts or after a minimum 18 month period of trading with the Forestry Commission, an assessment of risk will be carried out in accordance with the procedures for routine assessment of existing customers described below.

For existing credit customers a fresh assessment of risk will be routinely conducted not later than 6 months following the previous assessment, or when a higher credit limit is requested by either a Country Director or the customer. These routine re-assessments of risk will take account of the following:

  • a. where the level of credit is unlikely to be more than £20,000:
    • contract performance;
    • payment performance;
    • bank reference;
    • local background report(s);
    • a credit agency report may be obtained.
  • b. where the level of credit is likely to exceed £20,000:
    • contract performance;
    • payment performance;
    • bank reference;
    • local background report(s);
    • a credit agency report may be obtained.
    • audited company accounts.(most recent available)

It must be emphasised that a poor payment record may result in either reduction of a customer's credit limit or even withdrawal of all credit facilities.

Mention has been made above of bank guarantees. These may be requested by the Forestry Commission, as a condition of granting credit facilities, in a number of circumstances :

  • with a newly-formed business which does not have a trading record of sufficient length upon which to base a reliable assessment of risk;
  • with an existing customer whose payment performance and/or financial standing has prompted a loss of confidence in their creditworthiness;
  • to bridge the gap between the maximum assessed risk (and hence the limit of any credit facility offered) and the desired value of business should that be higher;
  • where a customer contracts with the Forestry Commission to purchase material destined for overseas markets and it is considered prudent to cushion the Forestry Commission from the consequential effects of a substantial debt occurring between the customer and their foreign client.

Once a credit limit has been set the customer will be advised of its precise level by the Credit Manager. A credit limit will include the Value Added Tax element in all purchases.

A Credit Limit may be reduced in an extended period of low trading.

Customers are expected to operate within the credit limit set and, should there be the likelihood at any time of that limit being exceeded, the Forestry Commission reserves the right to suspend credit sales to that customer. As indicated above there is a provision for an increase in credit limit, subject to creditworthiness being established or a bank guarantee being provided, should this be necessary, as a result of an increased level of trading.

Any queries regarding the credit policy adopted by the Forestry Commission should be addressed to:

Graeme Coulthard 
Forestry Commission
231 Corstorphine Road
Edinburgh EH12 7AT
Tel: 0131 314 6394

Last updated: 9th February 2016