Not long after partners Stephen Schultz and Timothy Burgess
purchased export credit insurance to protect their electronics
distribution business, they had to collect on it-to the tune of
more than $250,000. A bankrupt subsidiary of a German company with
whom the partners had been doing business was unable to pay their
Leominster, Massachusetts, company, Kerotec Inc. But thanks to the
new insurance policy, the partners got paid anyway.
In the past, if you wanted to sell to foreign customers, you had
limited payment options: open credit terms (risky for the seller
unless a long-standing business relationship existed), cash in
advance (this is rare), or a letter of credit. Now, with export
credit insurance, there's another option to protect the seller.
According to Joe Grimes of American Credit Indemnity (ACI), a
Baltimore-based subsidiary of Dun & Bradstreet, export credit
insurance protects companies against nonpayment, slow payment and
insolvency.
This can come in handy if you're trying your hand at
exporting for the first time when you may be more vulnerable to
payment problems. Grimes says ACI's export credit insurance is
especially helpful to small companies because it frees them from
the responsibility of collecting credit information on overseas
buyers, as well as from much of the responsibility of managing
receivables.
Content Continues Below
Kerotec, which has clients in South America and Europe, uses
export credit insurance even after establishing a solid working
relationship with customers because insurance allows the company to
obtain financing on its international receivables. "Basically,
by having this insurance, we know what our maximum [loss] would be
[before the insurance takes effect]," says Schultz, who
believes small businesses that don't purchase export credit
insurance are asking for trouble: "For a small company to lose
half a million dollars would hurt."
Page 1 |
2 |
3 