How to Feast on the U.S. Food Export Boom Without Fear of Credit Risk

Last year, the U.S. exported a record $137 billion worth of food. Indeed, food has always been one of America’s leading exports, with grains accounting for the vast majority of products shipped. But lately, the U.S. has been exporting a lot more...


To underwrite, trade credit risk insurers must have an intimate knowledge of local conditions. They are experts in areas such as country risk: Is the business environment stable? Currency risk: Is money traded fairly and efficiently? Transparency: Are the courts fair?

Then, of course, there is the creditworthiness of the customers. What is their payment history? Have they ever defaulted? Have there been judgments against them? What is their condition today? The larger credit insurers collect and constantly update the credit histories of literally millions of foreign companies.

With the threat of credit risk removed, U.S. exporters can concentrate on sales. They can offer terms equal or better than those offered by competitors.

Food exporters also find that purchasing trade credit insurance improves their financial profile and borrowing power. Lenders are more likely to advance working capital at lower cost when receivables are protected. Lower interest rates enable exporters to pass the savings on to customers or keep it for themselves.

In addition to making sure exporters get paid, some credit insurers even provide their customers accounts receivable management services. Essentially, they become a company’s foreign credit and accounts receivable department. Some of the larger insurers also provide collection services.

So, while there are many ways exporting companies can manage their credit risk, only one, trade credit insurance, provides users a competitive advantage with benefits such as up-to-date knowledge of a customer’s creditworthiness, a clear understanding of the local business climate, speed to market, market intelligence, a stronger financial position, and the ability to offer better terms to customers.

With payment assured, U.S. food exporters can concentrate on sales and provide new and existing customers with better terms. And, better terms mean more sales.

 

Kerstin Braun, PhD is executive vice president of Coface North America, a subsidiary of $2.2 billion global credit insurer, Coface. She can be reached at Kerstin_Braun@Coface.com.

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