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Export credit insurance: to export with complete peace of mind

Export payment is one of the primary concerns of exporting companies.
Export credit insurance is a solution for exporting companies who want to benefit from financial protection against customer risk in the context of their international commercial activities, whatever their activity.
Credit insurance is often used in export credit.
The guaranteed area of a credit insurance contract can cover France alone, export alone or France and export.

The mode of operation of credit insurance for exports is similar to that of domestic operations.

Why take out export credit insurance ?

Customer risks are more difficult to assess internationally than in the home market. In addition, recoveries can turn out to be much more expensive, more complex and more random than expected.

Good to know :

Credit insurance companies regularly feed internal and confidential databases on the companies whose outstandings they guarantee to policyholders.
Clearly, if a company causes an outstanding payment to a customer, the information is taken into account in its assessment and in the corresponding guarantees.
Policyholders thus benefit from the information collected by credit insurers for the benefit of other policyholders.

How export credit insurance works

Export credit insurance includes 3 services:

  • Prevention of non-payment: the insurer intervenes on a preventive basis by selecting new prospects or reliable customers. It analyzes the financial health of customers and monitors their solvency
  • Recovery: It allows you to outsource the recovery of your trade receivables to 2R CONSEIL. All amicable or legal collection procedures are handled by a specialist to recover your debt more quickly and more efficiently. 2R CONSEIL benefits from a network of international correspondents who benefit in each country from a perfect knowledge of commercial practices as well as legislation. They are seasoned in follow-up and recovery operations adapted to the local specificities of your activity for each country
  • Compensation: in the event of non-payment, the credit insurer compensates the insured up to 90% of the amounts excluding tax of unpaid debts to your guaranteed customers

5 tips to avoid non-payment for export

1/ Determine and assess the risk

Before any commercial prospecting, start by collecting information on the country where your client is located. Obtain the economic figures of the country and more particularly those concerned with your sector of activity. Rating of the country, average growth per year, public deficit, number of defaults, dependence on raw materials, rate and evolution of unemployment, indebtedness of the country, control of inflation, export, imports, number of defaults, solvency of the actors , probability of default of companies, evolution of investment, etc..
Find out about political risks, the risk of conflict, the stability of political bodies, the sustainability of jurisdictions, etc.
Have a good knowledge of the commercial practices of the country: applicable legal provisions, regulations in force, legislation, what are the payment deadlines, payment practice, types of contracts, legal structure of companies, etc...

2/ Check the identity of your client

This is the first thing to do, before starting a commercial approach. Make sure you are dealing with the right business entity. Analyze letterheads and all other documents at your disposal (letters, brochures, websites, etc.)

3/ Check the health and financial solidity of your client

Obtain as much information as possible about the company: Commercial name, DUNS number, legal form, company address, billing address, names of interlocutors, company managers, total number of companies in the same sector of activity.
The key figures of the company: turnover, balance sheet, assets, liabilities, gross operating margin, maximum monthly outstanding amount without guarantee.
Obtain via financial information companies the evaluations of the target company: rating, financial solidity, risk indicator, failure score.

4/ Choose risk-based payment solutions

Good to know: before any commercial transaction, have your general conditions of sale signed. To watch closely: late penalty, litigation conditions.

To limit the risk of non-payment, ask for a payment with the order or a deposit according to the risk.
You can also use documentary remittance, which consists of mandating a bank to deliver the goods against payment for them. This solution does not protect in case of abandonment of the order.

A more expensive solution consists of using the irrevocable documentary credit or credoc which allows payment to be guaranteed within a specified period and after shipment of the goods. It is a commitment made by the bank which issues the documentary credit and which against documents ensures the successful completion of the customer's payment.

This technique makes it possible to resolve conflicts of interest between the parties. The seller is reassured before committing to its realization because he is sure to be paid. The buyer is also reassured because he can check the quality of the service before paying.
However, the credoc has two major drawbacks. It is often accompanied by fees and commissions that increase the cost of this solution (about 5% of the guaranteed amount). The multiple documentary exchanges between the actors lengthen the implementation deadlines.

5/ Insure yourself against the risk of non-payment

This is the safest solution. For export, it is possible to subscribe to a credit insurance contract adapted to international markets. It allows you to be compensated in the event of non-payment. This insurance contract requires prior approval of solvency on your client for a determined outstanding amount.
This solution is also accompanied by several services: monitoring of your customers, management of disputes, recovery.
It is possible to insure all or part of your turnover, the premium will then be calculated according to the insured volume. The costs are calculated from your turnover and depend on several factors: customer type, country risk, loss history, etc.
Insurance against non-payment also brings several advantages: The first advantage is to guarantee up to 100% the risk of non-payment, to recover debts and to secure payments. The second advantage is to reassure all of the company's financial partners: banks, factors, financial services, etc.
Thanks to a delegation of the right to indemnities for the benefit of these establishments, the lines of financing can be granted more easily and even, in certain cases, be increased.

Do not hesitate to contact us by email jfmallozzi@2rconseil.com so that we can send you the completed study file to return to us

Upon receipt, we will send it to our specialist who will return the comparative study related to your file to us.


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