There is an inherent gap in business transactions for any type of B2B sales. This becomes even more complicated when a business in the United States is selling goods into a foreign country.
The International Sales Risk
In this case, there is not only the gap in time for net terms payable, but there is a risk associated with the default of the payment by the purchaser. It can be challenging enough when nonpayment occurs with another American company, and international laws can make it even more difficult.
To address this issue, using the Export Insurance Agency in the form of the EXIM credit insurance provides protection for the business as well as for the lender. What this does, in essence, is insure the accounts receivables of the US company. The insurance from the Export Insurance Agency will provide a percentage of the value of the accounts receivable if the buyer defaults, whether it is for commercial or even political issues.
In using the program through an Export Insurance Agency, a business will have opportunities available that would not exist without this insurance. These include:
- Streamline the back-office tasks – when working with EXIM, your business can take advantage of their risk assessment, collection, and buyer assessment programs. This allows your company to make informed decisions and streamline your back-office requirements.
- Growth potential – with the backing of insurance at up to 95% of accounts receivable, your business has the ability to take on new markets and opportunities with very limited financial risk. You can also offer longer terms for purchases, giving you an opportunity to move into new markets.
- Increase borrowing ability – with the backing of EXIM it is possible to turn accounts receivables into assets a traditional lender will consider. This is not possible unless there is insurance coverage.
Any business should consider this option if moving into international sales. It is certainly worth consideration and offers opportunities for small to large companies in any industry.