Westech Seal, Inc., located in Odessa, Texas, is a small business manufacturer of mechanical seals and related components for centrifugal pumps. Founded in March 1987, Westech supplied seals to well-known companies including Texaco, Exxon-Mobil and many more as well as a network of over 200 distributors across the United States.
Despite their success in the United States, Westech recognized there was enormous growth potential for the company in selling their products internationally, but entering new markets was challenging. The first challenge the company faced was intense global competition. Mark Merritt, Westech Seal CEO, found that someone, somewhere was always willing to make it cheaper. The second challenge was the risk of nonpayment by overseas buyers, which can be devastating to a small company’s financial health.
Working with EXIM Bank, Mark was able to address both of these problems, allowing the company to pursue new customers in new markets with the confidence that their assets were protected. EXIM Bank’s Export Credit Insurance provided 95 percent coverage for foreign receivables, giving Mark and his team the peace of mind that if an international customer did default on payment, the company was covered for 95 percent of the sales invoice. Having Export Credit Insurance also positioned Westech strongly against competitors in foreign markets by empowering Mark to offer credit terms to international buyers, something that some of the company’s competitors were unwilling to do. The ability to offer credit terms, knowing that the receivables were covered, was a clear differentiator for Westech and the company now exports to Canada, Israel, Bahrain, Kuwait, Saudi Arabia and many other countries.
As an added bonus, Export Credit Insurance also improved Westech’s liquidity. Most commercial banks will exclude foreign receivables from a company’s borrowing base unless the receivables are insured against nonpayment. With export credit insurance, Westech’s foreign receivables were included in its borrowing base, providing the working capital needed to fulfill international orders.
Sage Oil Vac
In 1993, Gary Sage, founder of Sage Oil Vac was looking for a better way to change the oil on his irrigation engine without spilling any on the ground. Gary realized that vacuuming the oil directly from the irrigation engine pan would do the trick, and the Sage Oil Vac was born. What Gary didn’t realize until he implemented the Oil Vac is that not only was it cleaner and environmentally responsible, the Oil Vac cut the time to change the oil in half.
Gary’s innovative and entrepreneurial spirit lead to the development of new processes and products and when companies across the world began demanding Sage Oil Vac’s fluid handling equipment, they just wanted to provide it. Recognizing the risk that nonpayment by an overseas buyer would pose to a family-owned small business, Gary required international buyers to pay cash in advance. This was particularly difficult for a buyer in Australia who had to wait up to 12 weeks to receive the product before they could use it to make a profit. There were also significant opportunities to sell the Oil Vac in other countries, however, the company was concerned that political and/or market conditions increased the risk of nonpayment.
Using EXIM’s Export Express Insurance policy, Sage Oil Vac delivered customer satisfaction by offering credit terms to foreign buyers, secure in the knowledge that their receivables from international buyers were covered for nonpayment. The insurance policy also empowered the company to sell into new markets, increasing business and adding U.S. based jobs. Today, Sage Oil Vac is selling to countries around the world and generating between 15 – 20 percent of the company’s revenue from export-related sales.
“EXIM offers the insurance needed to mitigate some of the risks for small businesses that offer their products worldwide,” said Aaron Sage, CEO Sage Oil Vac. ”It allows you to focus on the things you need to focus on, which is developing and delivering a product to a happy customer, without having to worry as much about non-payment."
EXIM provides trade finance solutions for small businesses nationwide. Download the Guide to Export Credit Insurance to learn more about protecting your company’s export receivables and contact your local EXIM representative for a no-cost consultation today!