Internationalization offers tremendous growth opportunities for SMEs, but it also comes with significant risks, such as non-payment by foreign clients or political instability in target markets. To protect against these risks, more and more companies are turning to export credit insurance, a tool that provides security and supports international expansion. In this article, we explore what it is, how it works, and why it’s essential for exporting SMEs.
1. What is Export Credit Insurance?
Export credit insurance is a policy that protects businesses from the risk of non-payment by foreign clients. It covers situations such as:
- Buyer insolvency: If the client cannot pay due to bankruptcy or financial difficulties.
- Political risks: Such as wars, riots, or regulatory changes in the destination country.
- Commercial risks: Payment delays or contractual disputes.
This tool is particularly useful for SMEs operating in high-risk markets or with new clients.
2. Why is it Important for SMEs?
Small and medium-sized enterprises often lack the resources to absorb losses from unpaid credits. Here are the main benefits of export credit insurance:
- Financial protection: Reduces the risk of losses and improves cash flow stability.
- Access to credit: Banks are more likely to provide financing if receivables are insured.
- International competitiveness: Enables offering more flexible payment terms to foreign clients.
- Expansion into new markets: Facilitates entry into countries considered risky.
3. How Does Export Credit Insurance Work?
The process is simple and involves a few steps:
- Risk Assessment: The insurer analyzes the profile of the foreign client and the destination country.
- Policy Stipulation: The coverage is defined, which can be for single transactions or a portfolio of clients.
- Monitoring: The insurer keeps track of insured clients and flags any risks.
- Reimbursement: In case of non-payment, the insurance covers up to 90-95% of the credit.
4. Solutions for SMEs: SACE and Other Tools
In Italy, SACE is one of the leading players in export credit insurance. It offers tailored solutions for SMEs, including:
- Customized policies: Coverage tailored to the company’s needs.
- Guarantees for financing: Facilitates access to credit for international investments.
- Consulting services: Support in risk assessment and managing foreign clients.
Other options include private insurers or tools like international factoring, which advances payment on invoices.
5. Practical Tips for Choosing the Right Policy
Here are some tips for SMEs looking to insure their receivables:
- Assess risks: Analyze the markets you operate in and the profiles of your clients.
- Compare offers: Request quotes from multiple insurers and compare coverage and costs.
- Read the fine print: Make sure you understand exclusions and policy limits.
- Rely on experts: Consult a broker specialized in credit insurance.
Conclusion: Invest in Security to Grow Abroad
Export credit insurance is not just a protective tool but a true ally for the international growth of SMEs. Thanks to risk coverage, companies can explore new markets, improve liquidity, and strengthen their competitiveness.