Insurance

A Guide to Pros and Cons of Export Credit Insurance

Most small businesses concentrate only on the domestic market and fear grab opportunities provided in the international market. This is because some companies work on limited funds and if their buyers do not pay timely, their operations are interrupted. Handling business and local buyers are easier than handling foreign buyers.

Doing business internationally is extremely beneficial for the better growth of the business. Some companies are regular exporters while some companies get a chance once a year to do some exporting. However, not every client needs to receive a relevant buyer. Some clients make consistent payments and are reliable, while some default at payments even after receiving the shipment. In situations like these, businesses that run on limited funds are often at a big financial loss.  This is the reason why export credit insurance was introduced to protect businesses from foreign buyer defaulters and to provide smooth cash flow to keep operating their business.

What is Export Credit Insurance?

In simple words, give exporters a kind of protection on their foreign receivables against the risk of non-payment from the foreign buyers.  The non-payment can be due to commercial-related risk (insolvency of buyer or bankruptcy), or political risk (terrorism, war, revolution, etc.)  Export credit insurance is also known as trade credit insurance which is available in every country and state and should be taken by all business owners who export to foreign lands.

If you are an Australian exporter looking for export insurance, contact Niche Trade Credit to protect your business against bad debts. Their 30 years of experience have made them the number one trade credit insurance broker in Sydney, Australia. Their staff is highly qualified and professional that provides clients all kinds of benefits that help them in risk-free trading. Whether it is export credit insurance, debt collection, and recovery, or political risk insurance, NTC has solutions to all problems and risks involved in business trading.

Advantages of Export Credit Insurance

  • There can be incidences when foreign buyers are unable to make payment upfront or fail to pay even after receiving goods/services provided. ECI policy secures the cash flow of the tradesman by protecting them against payment defaulters.
  • Most banks are reluctant to lend businesses for export as the tradesman is inexperienced in the field but when the financial institution sees that they have ECI policy it helps in building strong and trustworthy relations.
  • When you have a backup or an insurance plan that will support you during emergencies, you automatically gain the confidence to explore new markets and expand your credit terms to grow your business.

Disadvantages of Export Credit Insurance

  • Export credit insurance policy is not available for accounts that have high credit risk.  In case they are eligible, the fees will be extremely high which means the tradesman will pay much more than what they are receiving.
  • Not all incidences are covered in ECI policy. Conditions like bankruptcy, political turmoil, defaulting is covered in ECI policy, but slow or late payments, customer disputes, or claims on products are not covered in ECI.

Not all trade credit companies provide similar kinds of insurance policies. Every company has its terms and conditions as well as limitations, therefore it is wise to understand the information before proceeding further.

 

 

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