Exporters face a great deal of uncertainty in the global market, and trade credit insurance exists to make doing business less stressful. When it comes to trading in the international market, U.S. exporters face several types of risk. Trade credit insurance policies function as safety nets. Foreign buyers may be unwilling or unable to pay due to forces beyond their control. Without trade credit insurance, those sales are lost – as are the exporter’s goods.
Trade Credit Insurance Builds Your Business
Exporters want to receive payment for shipments as soon as they leave the country. However, buyers usually want the most flexible payment options possible – they don’t favor having to pay up-front for shipments.
Trade credit insurance heavily mitigates the exporter’s risk, giving an exporter the flexibility to offer buyers more attractive payment terms. Enticing buyers with easy payment plans is a great way to attract business and build a client list. It is much easier for the exporter to do this when protected by trade credit insurance.
The Types of Trade Credit Insurance
Trade credit insurance policies are available for almost any size exporter, so it’s important to know what type of plan would work best for your company. Trade credit insurance generally falls into two main types:
- Export credit insurance. This type of trade credit insurance protects the exporter from foreign buyer nonpayment. A buyer may attempt to refuse or delay payment if possible.
- Political risk insurance. This kind of trade credit insurance protects the exporter from unforeseen circumstances that affect the buyer’s region, such as political unrest, wars, riots, revolutions, appropriated shipments, and other similar circumstances.
Keep this information in mind when it comes time to assess your organization’s insurance needs and the inherent risks to your operations. For more information about the types of trade credit insurance, contact the experts at Drake Finance today.
