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Common Reasons for Payment
Default by Foreign Buyers
by Steven Kozack and Michael C. Dennis

International Credit Articles
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Benefits of Export Credit Insurance

A growing number of U.S. companies are choosing to purchase credit insurance coverage for their foreign exports. Export insurance helps companies to expand their international sales with greater confidence, and enables U.S. companies to compete more effectively in an increasingly global market by being able to offer competitive terms including open account terms to foreign buyers.

Some of the more common reasons for payment default by foreign buyers include:

  • Cash flow problems

  • A lack of availability of U.S. dollars with which to make payment

  • Customer insolvency

  • Changing economic conditions in the buyer's country

  • Changing government regulations in the buyer's country

  • A significant change in the relative values of the two countries making the product your company exported far more expensive to the buyer

  • War, or civil unrest in the buyer's country

  • Seizure of the buyer's assets by the government

  • Embargoes and trade sanctions

In many of these scenarios, the seller would be covered under an export credit insurance policy. For the credit manager working for a company that exports products overseas, it would be inappropriate not to at least consider the costs and benefits of purchasing an export credit insurance policy.

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