I met today with Kate Bishop of the U.S. Export-Import Bank (“Ex-Im Bank”). The Ex-Im Bank serves as an export credit agency for the United States, and they help to fill the gap when credit might be otherwise unavailable for export transactions.
One of their special areas of concentration is supporting small business exports. The Ex-Im Bank provides loan guarantees, direct loans, and export credit insurance.
What does this mean for PMA companies? For many PMA companies that do not have a significant experience in past exports, one of the daunting issues is how to provide credit to customers while maintaining a reasonable assurance of payment. The Ex-Im Bank’s export credit insurance may be the best answer for those sorts of transactions. Export credit insurance allows a PMA manufacturer to safely offer credit terms to export customers.
Kate Bishop explained that $100,000 of export credit insurance on credit offered at 60 day terms costs a company less than $600. If the PMA company is not paid by the buyer, then the export credit insurance pays 95% of the value of the insured transaction (so a default on$100,000 would yield an insurance payment of$95,000). After the PMA copmany is paid, then the Ex-Im Bank would seek to collect the debt, and if the Ex-Im Bank is eventually able to collect the debt, then the payment back to the insured PMA company would increase!
This is a great way for PMA companies seeking to enter foreign markets to protect their export receivables.
Interested in starting the process? You can apply for export insurance on-line, but the best way to get more information before you start is to speak to a trade finance advisor by calling (800) 565-3946 or by sending an email to the Ex-Im Bank.