Reprinted with permission from The Journal of Commerce – Wednesday November 13, 1996
By Gordon Platt
For many companies, overseas markets represent their best growth opportunity. Export credit insurance provides the means to offer open credit terms, a sure selling point with foreign buyers.
Export credit policies offer protections from unexpected customer defaults due to a wide range of defined insolvency’s.
It gives exporters the ability to pledge export receivables and insured purchase orders as collateral for working capital financing.
By eliminating the need for letters of credit, exporters help their customers keep their working capital lines of credit available for other uses, said Jeff Dworack, Marketing Manager for Global Commercial Credit, Bingham Farms, Mich.
Many new carriers are entering the market with a wide variety of new and improved programs that can be customized to each situation.
Credit Insurance has been used by many US companies for the last 100 years, but many more companies are still unaware of the product’s existence, Mr. Dworack said. As competition in the global marketplace heats up, he said, more and more customers are demanding open credit.
By using insurance to hedge the risk of loss, exporters can extend open credit that will permit foreign customers to purchase the quantity of product they desire. Open credit, or open account, is a trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment.
In a competitive situation, this may make the difference between securing the contract or losing the business. Exporters can also use the policy to replace any reserve against doubtful accounts. the reserve is then moved to the bottom line, increasing profits.
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