Manufacturing Today - August 2017 - 19

MARCOS LOPEZ | COLUMN BY

herein lies the problem:
exporters typically wish
to be paid upon shipment;
importers traditionally
like to pay upon receipt
to verify the product
upon arrival.

Marcos Lopez is vice president and sales producer, Property &

Casualty at NFP's Chicago office. NFP is a leading insurance broker
and consultant. Visit nfp.com for more information.

AUGUST 2017 manufacturing-today.com

19

E XPORTING

A D INDEX

L EAN MANUFACTURING

W ORKFORCE

O P E R AT I O N S

Trade credit helps companies seek opportunities where it makes the most
sense rather than where the opportunities are simply doable. It allows businesses to capture the opportunities
with higher margins and growth opportunities. Clients are typically able
to achieve higher margins in markets
where at first glance it may appear too
risky to do business in. The goal should
be to find a partner that can help manufacturers capture these opportunities
and capitalize on the higher-margin
business opportunities while protecting them at the same time.
Trade credit offers companies protection, and it's often perceived that
this protection is the primary reason

L EADERSHIP

The Bottom Line

to purchase trade credit. However,
the most common benefit companies
obtain by investing in a policy is that
it assists them to increase sales and
profits without taking on additional
risk. Growth is actually the most common benefit companies get by utilizing a policy. It's for this reason that
even if a policyholder never makes a
claim, these policies will typically pay
for themselves many times over.
Credit insurance is often used in
export markets with countries and
customers where a business has had
no prior experience or exposure, or a
location that has a political environment that makes it more challenging
to do business in.
Trade credit insurance provides
protection to companies in international markets where they'll traditionally face unique export risks, while
allowing those companies to expand
their opportunities for growth abroad.
In many ways, companies that conduct
business-to-business trade are already
investing in a trade credit program.
Trade credit insurance simply allows businesses the ability to gain exposure safely to both importers and
exporters around the world, allowing
them to expand their individual businesses and increase the number of opportunities they have. mt

C OMPETITIVE EDGE

I NDUSTRY4.0

L AST PAGE

A CCOUNTING

F U N D E M E N TA LS

Insurance will always be there to protect clients but, more than just being
a safety net, trade credit insurance offers clients the unique ability not just
to be protected against a loss but to
have the opportunity to expand their
business in markets that they traditionally felt were too risky to participate in before.
It's often in these markets that

I MPROVEMENT

Ongoing Growth

higher margins can be obtained, and
with credit protection, companies
are safely able to increase sales and
margins simultaneously in an area in
which they most likely didn't do business before.
Trade insurance offers companies
numerous benefits, including the
ability to expand sales not just domestically and internationally; in many
cases, it allows companies the ability
to improve financing terms with their
lenders. When a company purchases
trade credit insurance for its accounts
receivables, it allows the company
not only to increase sales to its existing customers but also allows them
to expand sales in markets and with
customers that they perhaps felt were
too risky to do business with prior to
having trade credit insurance.
Once a business has trade credit insurance for their receivables,
banks will typically lend more capital
against those receivables, as they're
now insured. As a result, this typically
reduces the overall costs of the funds
for the company.

M ARKETING

D IALOGUE

M F G TOMORROW

T ECHNOLOGY

N EWS

L EGAL

A LFAB INC.

derstand all the options that are out
there for your business. Although
trade credit insurance is one of the
best options to help companies protect themselves from economic uncertainty, buyers need to remember
that there are many options when it
comes to credit insurance providers,
and picking the right one for your
business is one of the most important
parts of the process.
For a lot of American businesses to
grow, they need to export, and herein
lies the problem. Exporters typically
wish to be paid upon shipment; however, importers traditionally like to
pay upon receipt to verify the product
upon arrival. So, how does a business
leader combat this issue?
The solution is rather simple: to
bridge the time when importers are
willing to pay with when exporters
wish to be paid, a credit or guarantee
could be used. Trade credit assists by
mitigating the risk of cashless transactions. Typically, trade credit insurance policies are short term and
have maturities of less than 90 days.
These can be extended depending on
longer production and delivery requirements. This allows the business
to grow geographically, enabling it to
cross borders and establish business
relationships internationally with
minimum overhead and while mitigating the risk.


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Table of Contents for the Digital Edition of Manufacturing Today - August 2017

Table of Contents
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Manufacturing Today - August 2017 - 1
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Manufacturing Today - August 2017 - Cover3
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