GLOBAL DEMAND FOR CREDIT
and how to address it using
EXPORT CREDIT INSURANCE
Presented
12 November 2014
by Mabel Luen
Meridian Finance Group
Exporting in Economic Downturn

Global financial crisis not affecting every sector of economy

All countries linked but each region on its own path to recovery

Worldwide demand continues to engender international trade

U.S. is only 5% of world population and <25% of global GDP

20 free trade agreements with U.S.

Majority of exports from the U.S. is done through small to
medium businesses
Export Payment Terms
High
Buyer Risk
Cash in Advance
Documentary
Collection
Letters of Credit
Letters of Credit
Documentary
Collection
Cash in Advance
Open Account
Low
Seller Risk
Open Account
Global Demand for Credit
High foreign
interest rates
and exchange
controls
Competitive
tactic vs other
suppliers
Foreign buyers
facing limited
access to
capital
Customers
refuse to pay
cash in
advance or
open L/Cs
To develop and
support
distribution and
fill supply
chains
To keep doors
open in
strategic
markets
Exporters need
to extend credit
terms to
expand
international
sales
Problem: International Credit Risks
But what happens if exporters don’t get paid? Foreign credit risks:

Debtor bankruptcy, receivership, or insolvency

Cash flow problems, balance sheet issues, financial fraud

General economic conditions (there or in USA)

Currency fluctuations, foreign exchange, transfer controls

Expropriation, war, strikes, sanctions, and other political risks
Plus exporters may face working capital issues:

International sales require longer payment terms

Lenders may exclude foreign A/R from collateral
Solution: Export Credit Insurance
Protect
foreign
receivables
against
virtually all
default risks
Extend
competitive
export
payment
terms with
confidence
Expand
international
sales and
market share
Export
Credit
Insurance
Increase
international
profitability
Enhance
borrowing
capacity by
including
their foreign
A/R
Credit Insurance: Financing Tool
Export credit insurance enables lenders to:

Include foreign receivables in an exporter’s borrowing base

Offer more favorable financing terms to exporters

Take assignment of insurance proceeds as policy’s loss payee

Protect against borrower non-performance
Export credit insurance enables exporters to:

Strengthen their balance sheets

Reduce their bad debt reserves

Facilitate securitization of foreign A/R
Export Credit Insurance Underwriters
Federal Program:
Ex-Im Bank
• Unique small-business
policies
• 95% coverage
• Open in highest-risk
markets
• Only available for
products manufactured in
USA
Private Sector:
Insurance
Companies
• No content restrictions
• Minimum annual
premiums
• 90% coverage
• Less algorithmic, more
flexible underwriting
Meridian Finance
Group
• Specialized broker with 20
years of experience
• Most active Ex-Im Bank
broker in the country
• Access to every insurance
company in the market
Export Credit Insurance Policies




Types of Policies

Whole turnover, top buyers, reasonable spread of risk

Single buyer, adverse selection (cherry-picking)
Premium

Premium rates are a fraction of 1% of exporter’s invoice amounts

Pay-as-you-go with monthly reporting or paid annually in advance
Claim Filing

Immediately for some bankruptcy/insolvency or political risks

Flexible window of time for protracted defaults
Buyer Approvals

Named buyer credit limits from underwriter database

Decisions based on exporter, experience, transactions
Meridian Finance Group


Insurance

Export credit insurance

Political risk insurance

Domestic Receivables Insurance

Policies for financial institutions
Trade Finance

Cross-border equipment financing

Revolving buyer credit facilities

Note purchase agreements

Custom financing structures
For More Inforamtion
Meridian Finance Group
Mabel Luen
Regional Manager
mluen@meridianfinance.com
1247 7th Street, Suite 200
Santa Monica, CA 90401
Tel: 310 260 2130
Fax: 310 260 2140
www.meridianfinance.com
San Francisco, Seattle, Phoenix,
Raleigh, Miami, New York