A previous blog post outlined EXIM’s required documents for U.S. exporters seeking to obtain Export Credit Insurance coverage for a sale to a foreign buyer. These documents were summarized from EXIM's Short-Term Credit Standards, and EXIM’s underwriting department reviews them to make a determination on a foreign buyer’s creditworthiness. The credit standards provide transparency about EXIM’s underwriting practices, leading to consistency in transaction processing and other operational efficiencies within the agency.
Growing companies often seek to establish their own credit policy so they can apply the same standards across all customers, train new credit staff in credit and collection procedures, and guide the credit department on actions necessary in various situations. A credit policy provides “rules of the road” about payment terms, discounts, when to stop shipments, and whether to reduce or increase credit to a customer. For example, if a customer invoiced at net 60 terms was 60 days late on payment (120 days from the invoice date), the credit department may place the customer on a credit hold that would prevent any further shipments or even acceptance of new purchase orders. A formal credit policy would give the credit department the discipline and justification it needs to make a decision to stop shipments in a matter-of-fact way.
EXIM’s Short Term Credit Standards can serve as a reference or template for U.S. companies who are shaping their own credit policy. Which items will your new credit department need – credit reports, trade references, and/or ledger experience? At what point is more credit substantiated or a credit hold warranted?
Working with EXIM will provide your credit department with the experience needed to successfully grow, protect, and potentially utilize private sector insurance coverage that will require companies to have a tried-and-true credit and collections policy. To get started, click here to schedule a free consultation with an EXIM trade finance specialist.
