Advantages of Export Credit Insurance

Exports are the largest area in a many businesses for potential growth. Both developed and developing companies may have new products and services that can be sold to foreign customers. However, given the differing laws regarding business and credit, payment for a purchase is not always secure. That is where export credit insurance comes into play.

Little Capital

Many countries have limited capital and prefer to use credit in order to pay for products that are imported into their countries. Business owners might decide to protect themselves against irresponsible buyers by purchasing export credit insurance. Businesses are usually willing to accept credit from customers, but they have to worry about whether or not international businesses will pay them.

Coverage

One advantage of export credit insurance is that they usually have an open mind in regards to what they will cover. Most political and insurance situations that lead to a vendor not being paid can lead to reimbursement from the insurance company. This includes bankruptcy, problems with currency conversion, war, strikes, riots, revolution, national disasters and trade embargoes.

Premium

Businesses have to pay premiums to their export credit insurance companies, which will come out of company profit. For businesses dealing with customers who have proven reliability, export credit insurance might not be necessary.

Attracting Customers

Those who use export credit insurance can extend payment terms, allowing purchasers to buy in larger quantities. This makes business with you more economical for your purchasers.

Reliability

Export credit insurance companies often provide information on how reliable potential purchasers are. However, these insurance companies might choose to no longer extend credit to vendors who consistently deal with irresponsible buyers.

Content

In the past some export credit insurance companies only covered those who had exports that were 51% American, making export credit insurance unavailable to those dealing in content that is not mostly American. Some credit insurance companies also require that political risk coverage be purchased, further driving up costs.