Export Credit Insurance
Export credit insurance represents a form of financial risk protection for companies that engage in exporting activities, as well as other related business endeavors. As exporting activities can often times be risky due to currency exchange issues and credit related risks, export credit insurance is an invaluable tool that can assist businesses in minimizing the potential losses associated with dealing in export-related dealings.
When obtaining an export credit insurance policy, companies pay a percentage of the invoice amount as a premium in exchange for protection in the event of a customers non-payment or delayed payments on an invoice. Generally speaking, an export credit insurance policy will cover up to 90 or 95% of the face value of a customer invoice, which can potentially result in a large amount of financial losses if a customer does not pay their invoice despite assurances otherwise.
In addition to offering financial risk protection, an export credit insurance policy can also provide businesses with information that is critical to their success in the exporting industry. By understanding the credit risks associated with potential customers, businesses can make more informed decisions when it comes to whom they do business with. Furthermore, an export credit insurance policy can also provide businesses with access to additional working capital and finance options that may not otherwise have been available to them. Moreover, companies may be able to obtain some additional incentives from their suppliers when utilizing export credit insurance, as suppliers have the stability and security of knowing their invoices will be paid in a timely manner despite the risks related to the exporting industry.
In short, export credit insurance represents an invaluable tool for companies that engage in exporting activities. By providing businesses with protection from financial losses, access to additional working capital, improved insight into their customers and potential suppliers, and possible incentives, export credit insurance can greatly increase a business chance of success in the global marketplace.
