Factoring 101

Ex-Im Credit Insurance

Ex-Im Credit Insurance

Ex-Im Bank makes available a broad spectrum of credit insurance policies for small and mid-size business as well as banks and other lending institutions and for various applications.  These include:

  • Multi-Buyer Standard Credit Insurance Policy
  • Multi-Buyer Express Credit Insurance Policy
  • Multi-Buyer Select Risk Credit Insurance Policy
  • Single Buyer Credit Insurance Policy
  • Letter of Credit Insurance Policy
  • Medium Term Export Credit Insurance Policy
  • Financial Institution Buyer Credit Insurance Policy

Ex-Im Credit Insurance Products

Credit insurance coverage protects your clients from non-payment of commercial debt. It makes sure invoices will be paid under normal terms and allows companies to reliably manage the commercial and political risks of trade that are beyond their control.  EXIM offers a suite of credit insurance products that protects not just the exporter, but also lenders that are financing the exporter.  Typically, these policies are issued for a 12 month period, require a minimum $500 policy issuance fee, and will insure 95% of the invoice. EXIM policies and policy guidelines include…

MULTI-BUYER EXPRESS INSURANCE:  Targeted to those new to exporting and companies with 10 or fewer export clients and under $10,000,000 in annual sales.  Insured parties should have 5 years or less experience in exporting.  Base coverage is 95% and EXIM approves all buyers. 

Mult-Buyer Express Insurance

Targeted to those new to exporting and companies with 10 or fewer export clients and under $10,000,000 in annual sales.  Insured parties should have 5 years or less experience in exporting.  Base coverage is 95% and EXIM approves all buyers.

  • Used to Insure against nonpayment by international customers.
  • Covers both commercial (e.g., bankruptcy) and political (e.g., war or the inconvertibility of currency) risks.
  • Obtains credit reports on foreign buyers (up to ten) the exporter elects to insure (these are complimentary though they remain with EXIM).
  • Arranges financing through a lender by using insured receivables as additional collateral.

Mult-Buyer Standard Insurance

Standard Credit Insurance Ex-Im Credit Insurance Policy issued.

  • Extends credit terms to multiple foreign customers.
  • Insures against nonpayment by international buyers.
  • Covers both commercial (e.g., bankruptcy) and political (e.g., war or the inconvertibility of currency) risks.
  • Arranges financing through a lender by using insured receivables as additional collateral.
  • Risk reduction: safeguard against catastrophic losses from buyer nonpayment.
  • Increased competitiveness: unlock the ability to offer buyers the credit necessary to expand into new markets and boost sales with existing customers.
  • Improved liquidity: accelerate cash flow by borrowing against foreign receivables.
  • Credit management expertise: ease the burden of credit risk management by leveraging EXIM’s international expertise

Mult-Buyer Select Risk Insurance

Exporters of U.S. goods and services can reduce the risk of selling on credit terms by insuring their export accounts receivable with EXIM’s short-term multi-buyer export credit insurance. The Multi-Buyer Select Risk policy (MBSR) option offers a number of benefits:

For Select Risk, the exporter must meet the following requirements:

  • Have at least three years of operating history and a positive net worth;
  • Have at least one year of export credit experience; and
  • After any “Standard” exclusions, the MBSR portfolio must be at least 50 percent* of the exporter’s TOTAL eligible export credit sales in U.S. dollars. In addition to the “Standard” exclusions (as defined below), the exporter can select “Non-Standard” (i.e., low risk) transactions to be excluded from coverage.

Single-Buyer Insurance

  • Risk reduction: safeguard against catastrophic losses from buyer nonpayment.
  • Increased competitiveness: unlock the ability to offer buyers the credit necessary to expand into new markets and boost sales with existing customers.
  • Improved liquidity: accelerate cash flow by borrowing against foreign receivables.
  • Credit management expertise: ease the burden of credit risk management by leveraging EXIM’s international expertise.
  • Policies cover both commercial and political risks.
  • Coverage rates range from 90-100% at an affordable premium.

Letter of Credit Insurance

The EXIM Letter of Credit policy can reduce a bank’s risks on confirmations and negotiations of irrevocable letters of credit issued by overseas financial institutions for the financing of U.S. exports.

This policy affords commercial and political coverage against the failure of an overseas financial institution (issuing bank), whether sovereign or private, to make payment or reimbursement to the insured bank on an irrevocable letter of credit. Coverage is also provided for the insured bank’s refinancing of payments under a sight irrevocable letter of credit of the issuing bank.

What is Covered

The policy applies to irrevocable letters of credit which conform with the Uniform Customs and Practice for Documentary Credits (UCP), 2007 revision, publication number 600 of the International Chamber of Commerce (as may be amended from time to time) where the insured has a relationship with the foreign issuing bank. The policy is not applicable to revocable, back-to-back, red clause or conditional letters of credit.

Coverage applies to irrevocable letter of credit sales for goods produced in and shipped from the United States during the policy period, and for services performed by U.S. personnel either in the U.S. or in a host country. Receivables for products, which are less than 50% U.S. content, excluding mark-up, and certain defense products, are not eligible for cover.

Medium Term Credit Insurance

Medium-Term Credit Insurance, like any insurance policy, provides protection in return for a premium. The policy safeguards exporters against the risk of foreign buyer nonpayment when extending credit terms of one to five years (or, in some cases, up to 10 years) and up to $25 million. With this security, exporters can increase their global competitiveness by offering buyers the financing needed to win sales.

  • Secure longer-term financing for foreign customers.
  • Insure against nonpayment by international buyers.
  • Cover both commercial (e.g., bankruptcy) and political (e.g., war or the inconvertibility of currency) risks.
  • The exporter offers credit terms to an international buyer to be covered by an EXIM insurance policy.
  • The buyer accepts the terms, and provides a cash down payment of at least 15% of the contract price prior to delivery, also issuing a promissory note to pay the remainder of the contract.
  • The exporter pays a premium for the policy on the last business day of the month immediately following each insured shipment.
  • If the buyer fails to make payments, the financed portion of the contract is insured at 100% by EXIM.
  • There is no minimum or maximum transaction amount.

Financial Institution Buyer Credit Insurance

Financial institutions can reduce their risks on a short term direct buyer credit loan or reimbursement loan made to a foreign buyer for the financing of U.S. exports through an EXIM Financial Institution Buyer Credit Insurance Policy (known as a FIBC or Bank Buyer Credit Policy).

A direct buyer credit loan is a loan extended to a foreign entity by a financial institution for the importation of U.S. manufactured or produced goods. A reimbursement loan is the financial institution’s reimbursement of a buyer’s payments to U.S. suppliers. In both cases, repayment of the loan is based upon a buyer obligation to the financial institution. This policy affords coverage against commercial defaults and political events that result in nonpayment under a buyer obligation.

Additional Content