Submitted by ICBA Asia, Brazil, India and the USA via the IRC Read & Delete Monthly
ICBA USA clients don't need trade credit insurance (TCI). If they needed to use it, broadly speaking, they would not be of interest to the underwriters, as they would likely be found uninsurable. Meanwhile, ICBA USA thinks its clients use TCI products to support business ambitions and expansions, rather than to quell fears and neuroses in a too-busy world. This blog post is the result of ICBA USA asking its clients: What was the biggest challenge that the use of trade credit insurance addressed?
The Challenge: POLITICAL RISK and WORKING CAPITAL and SALES GROWTH predicated upon the offer of MEDIUM TERMS (longer than a year)
Trade credit insurance has allowed us to expand our footprint into new markets where local banks do not offer medium-term financing. It has also given us peace of mind in markets where there is uncertainty in the market due to the instability. (Insured) sales now account for about 25% of our total sales. Trade credit insurance has also allowed for financing of inventory used in exporting which most domestic banks will not fund without.
- Texas equipment manufacturer
The Challenge: FINANCE
We found that having the credit insurance in place allowed us also to facilitate our banking and financial arrangements both in terms of increasing our bank lines as well as reducing the costs.
- Southwest commodities trader: worldwide multi-buyer cover, single-buyer cover in spots
The Challenge: REVERSE CREDIT INSURANCE in support of PAYABLES FINANCE PROGRAM
We now have improved cash flow, due to the longer payment terms we get from our major suppliers, and this in turn has substantially reduced our borrowing costs (fees and interest). Our growth has been phenomenal implementing this strategy. We determine which vendors are able to obtain portions of the available credit limit on us, i.e., for extended terms. This is, in fact, part of our negotiation to obtain longer repayment terms and larger credit lines. Our suppliers are able to substantially increase sales to us and, if need be, can even sell receivables to their lenders for earlier settlement of outstandings.
- Western consumer products manufacturer
The Challenge: RISK MITIGATION and SALES GROWTH
(Our company) has done business internationally for nearly six decades. The company’s original philosophy was to take little or no credit risk, especially on international sales. As a result of this rigid policy (we) had only about 3% of our business in international sales. In the eight years we have been insuring our international business, we have grown revenues from 3% to 30% of our total. And this was done without changing the company’s philosophy concerning risk tolerance. The risk is now mitigated through the purchase of credit insurance. We have found the processes required by the credit insurance provider to be fairly easy to follow. This goes from validating the new customer, (and) reporting their monthly sales to paying the premiums. (Our) bottom line has increased significantly as a result of obtaining credit insurance for international sales.
- Western specialty chemical manufacturer, covering sales to Russia, Asia and the Middle East
The Challenge: RISK MITIGATION, SALES GROWTH, INTERNAL CREDIT ADMINISTRATION PRACTICES
We use credit insurance primarily for risk mitigation. Having credit insurance on our exports gives us the advantage of having a second set of eyes review financial stability and creditworthiness on our foreign customer base with larger exposures. We are under increased pressure from our sales area and export customer base to grant credit terms and higher credit lines. Having credit insurance helps manage that risk. Also frequent country risk updates help us review accounts in risky areas in a timely manner. This allows us to be more proactive in high risk areas.
- Southeast Textile Manufacturer
ICBA USA serves ambitious clients, and is fortunate to serve each one. ICBA USA is very pleased to be part of these clients' problem-solving teams.
(ICBA Asia, Brazil, India and the USA agreed to share this post, originally in the IRC Read & Delete Monthly, with the ICBA blog.)