As more businesses enter and expand their presence in the international marketplace, concern over getting paid by foreign buyers is on the rise. Small business exporters rank worrying about getting paid as the most significant challenge they face, according to a survey of 500 small businesses conducted by the National Small Business Association in 2013. Nearly seven in ten exporters surveyed reported doing business on cash in advance.
Yet, demanding full payment in advance can cause customers to take their business elsewhere. To win sales, exporters often must extend credit terms to foreign buyers. If they don’t, their competition might.
The challenge? Taking on new customers means establishing new business relationships which can result in increased sales, but also increased risk. Requiring payment in advance affords exporters the greatest security, but is detrimental to their global competitiveness.
The Export-Import Bank of the United States (EXIM) can help. Through its export credit insurance program, EXIM equips exporters worried about nonpayment to confidently offer credit terms to foreign buyers. Export credit insurance safeguards exporters’ accounts receivable, guaranteeing invoices and promising repayment (up to 95 percent) if a buyer defaults due to commercial (e.g. bankruptcy) or political (e.g. war or the inconvertibility of currency) risks.
Exporters benefitting from EXIM support have given high marks for satisfaction with respect to timeliness, responsiveness and ease of transaction. Yet, only 12 percent of small business exporters reported taking advantage of financing programs such as EXIM’s export credit insurance, according to the survey.
Understanding the tools available to U.S. exporters can be the difference between making and missing out on sales. To better familiarize yourself with the value of EXIM support, download our FREE E-Book: A Guide to Export Credit Insurance, which will walk you through the basics of how export credit insurance works, how it can benefit your company and has empowered other exporters, and whether it’s a good fit for your export business.