(Part 2: Focus on EXIM Export Credit Insurance)
As a follow-up to my previous blog post about EXIM’s Working Capital Loan Guarantee, this second section explains how EXIM’s Export Credit Insurance, also called trade credit insurance, can help you export your professional services. Trade credit insurance- is an insurance policy covering accounts receivable generated from export sales. It protects against nonpayment by foreign buyers.
The following fictional scenario will help explain how trade credit insurance works for professional services.
Imagine that a dress manufacturer in Spain contacts your company to provide data analysis for three years of past sales history for its five product lines. The manufacturer wants your team to provide deliverables for product lifecycle reports based on data provided, plus two-to-five-year forecast projections and documented summary reports of those projections. The manufacturer will transfer data sets to your team within 15 days of contract signing and wants deliverables within eight weeks, sent via electronic data interchange (EDI) to ensure an immediate date/time stamp as a receipt to your company.
Before signing the deal with the Spanish dress manufacturer, your company should request a free consultation with an EXIM trade regional specialist to find out about the risk protection EXIM’s insurance offers. The insurance policies can be used to protect your accounts receivable from nonpayment by a foreign customer. If this is your first encounter with an international company and you have not extended credit outside the United States within the last five years, then, you should start with EXIM’s Express Credit Insurance policy which allows your company up to 10 prospective foreign customers by working with EXIM’s insurance underwriting team.
Why is EXIM’s Trade Credit Insurance worthwhile to service providers like you?
- EXIM Trade Credit Insurance covers up to 95 percent of the sales invoice value for nonpayment from commercial (i.e., bankruptcy) and political (i.e,. insurgency) losses by your foreign customer.
- You can increase your company’s competitiveness on potential foreign contracts by offering open account credit payment terms instead of a cash advance for completing the work.
- Your company can include EXIM’s monthly premium insurance payments as costs in your contract with your customer as a way to recover those costs.
With the insurance in place, you can go back to the dress manufacturer and complete the agreement by providing the details of your deliverables, costs to complete the work within the desired timeframe, and credit terms.
Watch the Export Credit Insurance quick video!
Your company begins making premium payments on your EXIM Export Credit Insurance policy within 30 days after starting work on this contract. If the dress manufacturer in Spain does not pay your company after deliverables are confirmed via EDI and within your agreed payment terms within your contractual agreement, your company can file a claim to EXIM. You will need to provide the contract terms, conditions, dated deliverables, etc. EXIM will review your claim within 30 days after it is filed. You should provide as much information as you can about the delayed payments, as stated in the terms of your EXIM Export Credit Insurance policy.
There are many opportunities for U.S. firms to export professional services, and EXIM provides tools like Working Capital Loan Guarantees and Export Credit Insurance to make it more feasible for you to do so. Our staff is ready and willing to help!