There are 2 types of companies that can provide financing in the purchase of real estate in Turkey;
A. FINANCING COMPANIES
Financing Companies are credit institutions that provide financing to real and legal persons for the purpose of purchasing all kinds of goods and services. More broadly, Finance companies or Consumer Finance Companies are institutions that provide loans. Credits are made on behalf of the real or legal person who purchases the goods or services, by making a direct payment to the seller, together with the delivery or supply of the goods or services. They make a general agreement in written form with the vendors who provide the goods or services to which they will be credited in accordance with the legislation to which they are subject. The customer applies for a loan through the vendor with whom the financing company has a contract. If the loan application is approved by the financing company, the financing amount is paid directly to the seller on behalf and account of the customers, together with the delivery and supply of the goods or services.
A.1.) How to set up financing companies?
As stated in the “Financial Leasing, Factoring, Financing and Savings and Finance Companies Law” numbered 6361, which entered into force with the Official Gazette published on 13.12.2012, for the establishment of a financing company in Turkey;
- At least five members of the Banking Regulation and Supervision Agency (BDDK) voted positively for the institution,
- Establishment as a joint stock company,
- Issuance of share certificates against cash and all of them are registered,
- Having the phrase "Financing Company" in the trade name,
- The founders must have the conditions specified in the law,
- The members of the board of directors must have the qualifications specified in the corporate governance provisions of the law and the professional experience to carry out the planned activities,
- Having a paid-in capital of at least 50 (fifty) million Turkish liras, in cash and free of all kinds of collusion,
- The articles of association are in compliance with the provisions of this law,
- Having a transparent and open partnership structure that will not hinder the effective supervision of the institution,
- It is obligatory to submit an activity program that shows the business plans of the foreseen fields of activity, the projections of the financial structure of the organization, the budget plan for the first three years and its structural organization.
A.2.) Financing companies are different from banks.
As stated in Article 39 of the above-mentioned Law; A financing contract is a contract that provides for the purchase of all kinds of goods or services to be credited on behalf of and on behalf of the real or legal person purchasing the goods or services, together with the delivery or supply of the goods or services, by making a direct payment to the seller. Loan repayments are made to financing companies by those on whose behalf loans have been opened.
As it can be understood from here; The most important difference of financing companies from banks is that they absolutely have to finance a purchase of goods or services, that is, a trade for which there is an invoice. In other words, a consumer loan-like product provided by banks, that is, a type of loan that does not have to present an invoice for loan use, is not available to financing companies. In addition to this, financing companies do not have the authority to collect deposits from depositors like banks. In addition, while banks are obliged to transfer the loan amount to the account of the person using the loan, the loan amount is made to the account of the institution issuing the invoice in financing companies.
As of August 2021, there are 15 FKB member financing companies in Turkey. Nine of these companies mediate vehicle financing, while the others finance housing or consumption items.
As of March 31, 2021, financing companies in Turkey;
- The total number of personnel is 837,
- Total paid-in capital of 2.3 billion TL,
- Number of open loans is 3.6 million,
- Total financing receivables including principal, rediscounts and accruals is 36.4 billion TL. Of the said 36.4 billion TL financing; Commercial vehicle loans of 20.1 billion TL, 12.7 billion TL of individual vehicle loans, 3.6 billion TL of micro loans and 33 million of which is housing loans.
When we examine the financing loans opened by these financing companies; In the first quarter of 2021, we see that they extended 743 thousand 906 new loans, with a total amount of 12.1 billion TL, with an increase of 133 percent compared to the same period of the previous year. (2020 first quarter: 5.2 billion TL)
As can be understood from these data; Financing companies support not only consumers, but also the automotive industry, SMEs and the Turkish economy, as stated on the official website of the FKB. In addition, by providing direct financing to the consumer, it alleviates the financial burden on the manufacturers and contributes to the focus of these companies on their main fields of activity, thus increasing production.
B. FACTORING COMPANIES
Factoring is a financing method in which businesses can immediately turn the checks they receive in return for their sales into cash, without waiting for their maturity. Businesses transfer the sales invoice they have issued to their customers in return for the check they receive to factoring companies and they immediately receive the necessary cash for their business. Factoring companies can offer –Financing, -Guarantee, -Collection services. There are 52 factoring companies actively trading at the moment.
B.1.) Factoring Company Establishment Process and Transactions
Entrepreneurs who want to establish a factoring company need to fulfill some conditions, and they need to get permission from some institutions. Explanatory information about the steps to be followed by these companies, which are established by obtaining a preliminary permission from the Undersecretariat of Treasury, is presented below:
Undersecretariat Permits
Before the permission to be obtained from the Undersecretariat of Treasury, these companies must have the status of a joint stock company, and all of the owned shares must be registered. They should also issue these shares for cash. Their capital must also be paid in TL 20 thousand. The main documents to be prepared after these conditions are met are as follows:
• A copy of the Commercial Registry newspaper in which the articles of association of the company were published.
• Notarized circular of signatures of authorized signatories
• In case the founders are natural persons, detailed curriculum vitae, identity card, residence report, income tax return for the previous year, introduction form of the founder, criminal record report
• If the founders are legal entities, income statement, balance sheet, activity reports, if any, and criminal record report for the last three years
• Graduate certificates of one of the higher education institutions such as economics, business administration, law, engineering, finance, banking, regarding directors, assistant directors and first-degree officials
• Report that these people have not requested liquidation, bankruptcy or bankruptcy before
• Role and authorization definition documents indicating that the service units of the factoring company will operate and their personnel are appointed.
• Clean reports obtained from the competent authorities regarding the shareholders and managers of the Factoring Company that these persons have not been sentenced to imprisonment for more than 5 years, have not been convicted of disgraceful crimes such as embezzlement, bribery, extortion, fraud, fraudulent bankruptcy, and have not been convicted of crimes such as attempted tax evasion.
B.2.) FACTORING COMPANY TAX OBLIGATIONS
There are special provisions regarding factoring transactions carried out by factoring companies. This taxation is examined within the scope of the general provisions of tax laws. These companies are subject to Joint Stock company corporate tax and hence their earnings are taxed under corporate tax. Detailed information should be obtained from Factoring special provisions regarding other taxation and payments, and updates should be followed.
B.2.a) Factoring Company Capital Structure and Auditing
6 December By BRSA Financial Institutions Association; Efforts are underway to increase the paid-in capital figures of companies that are members of factoring, financial companies and leasing companies to 30 million TL by the end of 2019. It is expected that there will be a decrease in these types of companies due to the capital requirement requirement and the liquidity shortage brought about by the economic environment.
Treasury Undersecretary; Factoring companies that will operate in accordance with the provisions of the decree issued on money lending business will be informed by the T.R. The Central Bank has the authority to determine and release it by taking its opinion. The activities of these companies are supervised by the Ministry of Finance and the Undersecretariat of Treasury. It is obligatory to keep all kinds of documents, information and books required by these institutions to be submitted by the factoring company and its personnel.
Ünal § Partners Legal Team
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