How do I collect on foreign sales?
- Generally, the best way to make sure you receive prompt payment for foreign receivables is to use secure payment terms and/or export credit insurance. This is especially important since collecting bad debts overseas can be difficult and expensive.
What international payment terms should I use?
- With new overseas customers, you should require substantial or full advance payment, typically by wire transfer to your bank account. You can also use a secure payment mechanism, letter of credit, irrevocable and confirmed on a US bank. If extended payment terms are prerequisite to getting the business, you may need to obtain export credit insurance. With insurance, you can offer your customer extended payment terms of 30 – 120 days. And, if your receivable is secure, you may be able to borrow working capital against it. International credit card payments are not considered secure, as they are subject to fraud. If you must use credit cards, it is advisable to get the payment up-front, and then wait up to 72 hours before shipping.
How do I finance foreign receivables?
- To finance foreign receivables, banks will require secure collateral, like commercial assets in the US, or a confirmed letter of credit secured with export credit insurance. If your bank is still reluctant to extend you credit, you can apply for an SBA working capital loan guarantee. This guarantee protects your bank against default, and thus encourages them to accept your business.
What types of insurance are available for my product?
- In most cases, it is prudent to obtain shipping insurance on your products and export credit insurance on your foreign receivables. Export credit insurance is available from both private and public sources. To obtain this insurance, your foreign buyer must be able to document credit-worthiness. Export Import Bank of the United States (EXIM) export credit insurance (covers 95 percent of your goods? value against buyer default and political risks, like foreign government expropriation and acts of terrorism. It usually costs slightly less than 1% of the shipment’s value. Private insurance may also be available. It is usually cheaper, but typically covers only about 80% of your shipment’s value, and does not cover political risks. The rates for export credit insurance vary from country to country based on perceived risk. Insurance may not be available at all for some high-risk countries.