Access Financing and Export Safely Using Export Credit Insurance
April 27, 2015
Luis Arguello, Sr. Luis Arguello, Sr.

This post is sponsored by the Export-Import Bank of the U.S.

U.S. businesses are increasingly discovering the rewards of exporting. DemeTech — based in Miami Lakes, Fla. — is one such company. Since 2000, DemeTech has grown to be one of the most successful surgical suture factories in the world. As it began to grow and increase its international sales, DemeTech had difficulty meeting its foreign customers’ demands to provide credit terms.

Export credit insurance from the Export-Import Bank of the U.S. (EXIM) equipped DemeTech to improve its business operations. With EXIM support, DemeTech was able to access capital from its bank and confidently provide credit terms to its foreign customers. Since starting to use EXIM in 2009, DemeTech has grown its revenue by 400 percent. In this Q&A, Luis Arguello, Sr., chief executive officer of DemeTech, talks about how export credit insurance empowered his business to grow.

Question: What was your main trade finance problem or challenge before working with EXIM?

Luis Arguello, Sr.: Before we started working with EXIM, we simply had no capacity to offer credit terms to our foreign buyers. We could not find a bank willing to finance our foreign accounts receivable.

Today, in order for a company to get export credit, banks require that foreign accounts receivable are insured. It is very difficult for a local bank here in the U.S. to go to a foreign country, to file a claim, and to try to recover a loan from an international client. This is why we rely on EXIM because the bank knows that if a deal goes south, the bank can go to EXIM, and EXIM can get the accounts receivable back and paid up.

Q: Before EXIM came in, [how were] your international sales? And now that you are a partner with EXIM, what are they now?

LA: Before we started working with EXIM, we were facing difficulties in giving credit to our clients, so we were having enormous difficulty growing our export sales. We simply did not have the capacity to offer credit to our international customers. Thus, our customers were only ordering very small shipments, and we couldn’t obtain larger contracts.

However, once we purchased EXIM’s export credit insurance— a short-term, multi-buyer insurance policy to be specific— our bank was willing to use our insured foreign accounts receivable as collateral and give us the credit we required to complete our international sales.

We are able to give our clients the credit terms they require, and subsequently they have increased the size of their orders enormously. This is a direct result of us being able to finance those sales.

Q: Can you give me a specific example of how EXIM helped when exporting? Have you had a client who failed to pay?

LA: With EXIM’s export credit insurance, we have minimized the risk of offering credit terms to foreign buyers, knowing that if they default EXIM will reimburse us 95 percent of our foreign accounts receivable invoice.

EXIM’s partnership with DemeTech has allowed us to be more relaxed when offering credit terms internationally. With recent crises around the globe, specifically in the Middle East, export credit insurance from EXIM has been a win-win situation for DemeTech and our clients.

To give you an example, in Egypt we had a distributor facing financial difficulty due to the current political and market climate. After attempting to collect payment from this distributor and failing to do so, we were forced to file a claim using our credit insurance policy with EXIM.

Once we submitted a claim with EXIM, we received payment within three months. The claim was settled positively for our business.

Q: What advice would you offer people who are in similar businesses with you?

LA: In order to be successful exporting your products and to compete against foreign companies, your international clients will require you to offer credit terms to buy your goods. There is no way that an exporter in the U.S. will be able to compete with the other parts of the world on a cash-in-advance basis.

DemeTech, by insuring our foreign accounts receivable, is more comfortable offering credit to our foreign buyers, allowing us to sell more.

Anyone wanting to do business outside of the U.S. must insure their accounts receivable, not only to mitigate foreign risk, but also to have as a tool to use with your bank so that your bank will be willing to finance your company properly.

To learn more about extending credit terms to foreign buyers and growing your business, download the free Guide to Export Credit Insurance here.