Trade Finance Credit Insurance
Credit insurance protects you against non-payment of your exports by overseas customers. This financial tool helps exporters expand their businesses, allowing them to obtain
short- medium- or long-term financing they need, while mitigating commercial and political risks. Both the Export-Import Bank of the United States and private insurance companies offer trade finance credit insurance.
Is a loan provided to businesses once the goods have been exported, based on the collateral of the receivable generated. This can be in the form of an insurance guaranteed
receivable, open account receivable, draft or letter of credit.
Is a loan provided to businesses that need working capital to purchase products for export, when the products
have 51 percent or more U.S. content. One option is the Working Capital Guarantee Program of the Export-Import Bank of the United States. When the products to be exported contain 51 percent or more foreign content,
trade finance companies and specialized banks will offer this type of financing.
Inventory finance is basically a line of credit issued to a supplier to finance foreign exports.
By leveraging inventory, an exporter can offer buyers more attractive payment terms.
Letters of credit work well for one-time transactions but are not the best way to finance repeat
orders. Factoring may be a good alternative, providing the exporter with immediate cash and the buyer with flexible payment terms. In factoring, a business sells its approved accounts receivable to a factoring
company (also known as a factor) and gets a cash advance for the amount outstanding. The factoring company retains a percentage of this amount until final payment of the invoice is made. The factor assumes
responsibility for collecting payment and charges a fee of 2% to 7% of the total transaction. The percentage charged by the factor is on the higher end in the case of a non-recourse purchase, in other words, when
the factor takes responsibility for foreign buyer defaults or other collection problems. Factoring is done on an ongoing basis: as you write new invoices they are factored, producing cash flow for your business.