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The Protection of Credit Insurance Equips an Oregon Exporter to Grow
June 23, 2015 Daniel Ford, Business Development Specialist, Small Business Group

THE CHALLENGE

Automation Solutions—based in Oregon—provides systems integration, programming, control panels and field support to manufacturers in the automated machinery industry.

In 2012, the company was asked to evaluate equipment produced by a nearby original equipment manufacturer (OEM) of laser machinery. Automation Solutions identified areas of improvement and built a power distribution component prototype, which exceeded the customer’s expectations. The OEM was enthusiastic about the solution’s potential and that enthusiasm resulted in an order of 40 components. 

Automation Solutions found itself dealing with a contract manufacturer of the OEM to fulfill the sale—in Malaysia. Suddenly, they were partnering with a vendor 8,000 miles away instead of ten minutes down the road. On top of that, in order to make the sale, Automation Solutions had to extend credit terms to the buyer.

“I had huge trepidations about that,” said Kip Johnston, President of Automation Solutions. “I didn’t know who these people were. I didn’t want to offend my customer and it was huge exposure for a company of my size.”

THE SOLUTION

Johnston had previously been introduced to the Export-Import Bank of the United States (EXIM) through the City of Beaverton, his local Regional Export Promotion Program member. He followed up with EXIM to discuss options for support. Automation Solutions used EXIM’s export credit insurance to safely offer credit terms to the buyer and capture the sale.

The company took out a Small Business Insurance policy with EXIM, safeguarding the credit terms it extended. If the buyer defaulted on its payment, Automation Solutions’ receivables would be protected at 95% of the invoice value. The policy required no advanced premium, allowing the company to pay within 30 days of the month of shipment. EXIM credit insurance provided the protection and peace of mind Automation Solutions needed to take on the deal.

THE RESULTS

By leveraging export credit insurance, Automation Solutions expanded its sales overseas.

“What we paid was very modest for the protection we received,” Johnston said. “It certainly got us through a tough point. I don’t think I would’ve taken the order without credit insurance from EXIM. I would’ve turned it down, given the risk involved.”

Insured against nonpayment, Automation Solutions took on and fulfilled the order. As a result, the company was able to deliver a quality product and significantly increase its revenue.

“It was probably a 15 percent increase in sales,” Johnston said.  Automation Solutions is now planning to expand its footprint into other countries and is looking to utilize EXIM again for additional export credit insurance and financing support.   

LEARN MORE

To find out more about how export credit insurance can mitigate risk and increase competitiveness for exporters, check out our FREE E-Book “A Guide to Export Credit Insurance”.

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