Safely Extend Credit to Your Buyers!
If you are a U.S. exporter, you likely made comments such as those below:
"Our foreign competitors are winning sales by offering "open account" credit but we do not want to take that risk."
"I am worried about selling in this market as I may never get paid."
EXIM Bank has the solution to these concerns.
International markets represent both tremendous opportunity and daunting risk. The Export-Import Bank of the United States' (EXIM Bank) Export Credit Insurance allows companies to win international sales, while taking risk out of the export equation.
While businesses are well acquainted with the concept of insurance and the importance of managing risk, account receivables are often the largest uninsured asset on a company’s balance sheet. Export credit insurance allows exporters to safeguard their foreign receivables, transferring the risk of nonpayment by overseas customers to EXIM. Like any insurance policy, the exporter pays a premium and gets protection in return. In this case, if a foreign buyer purchases on credit terms and fails to pay, the Bank pays the exporter up to 95% of the invoice value.
The benefits of export credit insurance are significant. The nonpayment protection feature gives businesses the confidence needed to enter new markets and chart a path forward with margins they can depend on. With this security in hand, exporters can increase their global competitiveness by offering the credit terms to its buyers. Moreover, export credit insurance enables companies to overcome cash flow obstacles, by borrowing against their insured receivables.
Questions and Answers
What does the insurance cover?
It covers both commercial risk (e.g., bankruptcy) as well as political risk. Political risk is an action taken by a government that prevents an exporter from receiving payment and/ or recovering goods. This could be war, insurrection, cancellation of licenses, or inconvertibility of currency.
What are the maximum repayment terms?
Short-term policies insure credit terms of up to 180 days and, exceptionally, up to 360 days for capital equipment.
Medium-term insurance protects term financing to international buyers of capital equipment or related services for amounts up to $10 million. Medium-term policies cover credit sales in which payment terms typically range between one and five years).
Do we need to cover all of our export sales?
There are policy options that cover a single foreign buyer, a defined set of many buyers, or an entire export portfolio.
Are there special policies for small businesses?
Yes. The policies offer up to 95% coverage against nonpayment by foreign buyers on short-term credit sales, with no deductible. Small business policies allow exporters to pay only upon shipment, assuring there are no lost premium dollars.
What countries does EXIM cover?
EXIM supports exports to more than 185 countries. There are some export destinations, however, that are not eligible for support. The Bank’s Country Limitations Schedule on its website (exim.gov) provides an up-to-date listing of approved countries.
What are the costs?
The insurance is very reasonably priced - costing as little as 55 cents per $100 of insured shipments.
What is the eligibility for this insurance?
Businesses meet basic eligibility requirements to receive EXIM support if they:
Have been in business for at least one year
Have at least one person working in the firm full-time
Have a positive net worth
Export products and/or services that have more than 50% U.S. content based on all direct and indirect costs (e.g., labor, materials, administrative costs)
Take the Next Step! EXIM Bank’s export finance professionals, located throughout the country, can help determine the right policy to meet your needs. Learn more at EXIM.gov, or to click here to contact an EXIM Trade Finance Specialist.