Del credere is an Italian term for a type of intermediary agency that guarantees payment for a producer’s products in exchange for a fee. If the buyer defaults on payments, the agency assumes financial responsibility. The agency generally sells to solvent buyers with good credit history and debt ratios.
Del credere originated in Italy during the Middle Ages. The word “del credere” comes from Italian and means means of belief or trust. An agency del credere is a company that agrees to sell a producer’s products and, in exchange for a fee, guarantees that the buyer will pay for them. Basically, an agency del credere is a type of broker, mediator or intermediary between a supplier and a seller. The agency receives a “del credere” commission, or fee, from the producer for ensuring that the good is sold and paid for in full. Consequently, if the buyer defaults on payments, the agency assumes financial responsibility. This promise that the buyer will pay or the agent will pay the amount that the buyer has failed to pay makes the agent a “collateral”.
An example might be the best way to understand the concept. If a glassblower makes a vase, he or she may contact an agency del credere to sell it. The glassblower would pay the agency a fee, also called a commission del credere, to ensure that if the vase sells, the glassblower is paid in full. If the vase is sold and the buyer successfully pays the full amount due, the agency del credere profits from the fee paid by the original producer. If the buyer defaults on payments, the agency del credere must pay the outstanding amount to the glassblower.
To ensure that the del credere agency does not lose money on missed payments, it will generally only sell to solvent sellers or buyers able to make payments. A solvency forecast depends on a good credit history and debt ratios. A good credit history implies that the individual or company has been given extended credit and has been consistently paid back on time. A high debt-to-equity ratio usually means that an individual or company has paid for its financial growth through debt-incurred processes, such as through buying and selling stock or borrowing. This makes your earnings more unstable and therefore a less attractive buyer for del credere agencies.
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