Export Credit Insurance
You need to offer competitive payment terms to grow your international sales. But what happens if your customers go out of business, file bankruptcy, run short on US dollars, or don’t pay you for some other reason?
Export credit insurance protects foreign receivables against customer insolvencies, business closures, ownership changes, cash flow problems, balance sheet issues, currency fluctuations, natural disasters, or general economic conditions in your customer’s country.
Political risks of nonpayment are also covered by export credit insurance, including currency inconvertibility, transfer risks, war, strikes, riots, civil strife, expropriation, nationalization, embargoes, trade sanctions, and changes in import or export regulations.
Export credit insurance does more than mitigate nonpayment risks. It’s a sales tool that can help you win more international orders and it’s a financing tool that makes your foreign receivables more attractive to lenders.
All of your insurable foreign receivables can be covered under one export credit insurance policy. A specific credit limit will be approved for each of your foreign customers or, if you qualify for a discretionary limit, your policy will insure the credit decisions you make yourself based on your own experience.
Alternatively you can apply for a credit insurance policy covering only your largest foreign customers. Or you can be even more selective, as long as the sales you want to insure represent a reasonable spread of risk. Policies covering just a single customer are less common, but may be feasible in some cases for a very creditworthy foreign debtor.
If you want to cover your company’s US sales, Meridian offers domestic accounts receivable insurance as well. Or you can insure both export and domestic receivables under one global credit insurance policy.
Premium rates for export credit insurance are based on the payment terms you extend, the spread of your buyer and country risks, and your company’s previous exporting experience.
The cost of export credit insurance is low, typically a fraction of one percent of your covered international sales volume, in most cases much less than the fees charged for letters of credit.
Whether or not you pass this incremental expense to your overseas customers, the price of export credit insurance is insignificant compared to the additional business you can win by extending competitive international payment terms.
Over the past 20 years Meridian Finance Group has helped hundreds of companies to grow their international sales using export credit insurance.
All policies brokered by Meridian are backed by top-rated insurance companies or by agencies of the federal government (Ex-Im Bank, et al). We offer coverage from every export credit insurance underwriter, enabling us to quote the most competitive terms and premium rates in the market.
More significant than Meridian’s ability to place coverage is the comprehensive technical support we provide to our customers. Credit insurance policies work differently from other kinds of insurance, so Meridian assists with policy compliance at the same time as we help exporters get the most out of their coverage as a sales and financing tool.
We understand your business. Our staff is multicultural and multilingual, with experience not only in export credit insurance but also domestic sales, importing, trade finance, logistics, and international distribution.
You can increase your international sales by using export credit insurance to extend competitive payment terms. Credit makes it more economical for your foreign customers to order larger quantities, enabling you to negotiate better pricing from your suppliers, make longer manufacturing runs, and transfer inventory carrying costs overseas.
Export credit insurance helps you negotiate stronger overseas representation by offering longer credit terms to your international agents and distributors. By providing an incentive to keep more of your products in their country’s supply chain, you’ll increase your market share and local brand recognition.
The opportunity to penetrate overseas markets has never been greater. You can start doing business in countries you might otherwise perceive as too risky for payment terms by using export credit insurance.
Export credit insurance makes your foreign A/R more attractive to banks, factoring companies, and other asset-based lenders. You can enhance your borrowing capacity and obtain more favorable financing by including your insured foreign receivables in your collateral base. Insurance policy proceeds are assignable to the lender of your choice.
You’ll strengthen your balance sheet and keep your company’s financial position secure with export credit insurance, despite exposure to unforeseen events, concentrations of foreign receivables risks, and changing international market conditions. Insuring your foreign receivables may also enable you to reduce your bad debt reserves.
Export credit insurance can help facilitate the “true sale” of your international accounts per FASB 140, on a case-by-case basis or in the context of a formal asset securitization.