Exporting with assurance.
You don't have to rely on prayers or luck to be sure you get paid for goods shipped overseas. There are more surefire methods available, among them Foreign Credit Insurance, World Traders Data Reports, and Letters of Credit.
Export credit insurance can be obtained through the public entity Arkansas Development Finance Authority. ADFA's "Insured Export Program" enables an Arkansas company to safely sell to unknown buyers or in unstable political markets.
For a small fee, you can buy a policy that will pay your invoice in the event a foreign company defaults. Rates are based on the length of terms you extend, the type of buyer (government or private) and the buyer's history.
Invoices for services, as well as goods, can be insured. ADFA's program has a maximum amount of $556,000. If an Arkansas company can't afford to wait for payment, ADFA can loan the company up to 90 percent of the value of the invoice.
The program is designed for open account sales and enables an Arkansas company to extend terms (up to a maximum of 180 days) to its foreign buyers.
"Of course we all like terms; it makes selling easier," says Patricia Chilton, export finance officer at ADFA. The program "allows an exporter to sell on competitive terms in foreign markets."
ADFA will file a claim for you, if that becomes necessary. Chilton says one of the nice things about credit insurance is the company you have sold to doesn't have to know you have gotten it. This might avoid putting a strain on a new and fragile relationship.
According to Chilton, Arkansas was only the second state to have a state-administered program.
Other "Insurance Policies"
In addition to actual insurance policies, other methods are available to help guarantee a U.S. company gets paid for foreign shipments. World Traders Data Reports, comparable to a Dunn and Bradstreet report, is a service offered by the U.S. and Foreign Commercial Service.
The WTDR assesses your potential customer's reputation by reviewing its bank and trade references, activities of prominent owners, recent news items about the company and other standard credit report information.
The report is up-to-date and reliable since it is developed by staff or contacts in the company's area.
A letter of credit is another way to insure payment from a foreign buyer, and is frequently used in the early stages of a business relationship. They are issued by a bank to the seller at the buyer's request.
Sometimes, none of the above methods are used, and a U.S. company collects on its invoices in a timely manner. While most exporting experts would not recommend this approach, J.T. Parsons of Osceola played his hunches and won. (See accompanying profile).
PHOTO : INSURANCE PREMIUMS Percentage Of Total Invoice
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|Title Annotation:||How to Export in the 90's; Arkansas Development Finance Authority program|
|Date:||Dec 17, 1990|
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