How to Use Export Credit Agencies: A Practical Guide for Trading Companies

Export credit agencies (ECAs) are government-sponsored financial institutions that provide insurance, guarantees, and sometimes direct loans to support their home country's export industries in international markets. For trading companies, ECA support can provide access to financing for transactions in emerging markets or with higher-risk buyers that would otherwise be impossible or prohibitively expensive.

The major ECAs include the US Export-Import Bank (US EXIM), UK Export Finance (UKEF), Germany's Euler Hermes (acting on behalf of the federal government), France's Bpifrance Export, and equivalent institutions in Japan, Canada, and most other developed economies.

ECA products for trading companies fall into three main categories. Buyer credit facilities — loans provided directly to foreign buyers to purchase goods or services from the ECA's home country — allow trading companies to offer their customers financing that increases purchase affordability and reduces credit risk to the trading company.

Supplier credit guarantees insure the trading company's receivable from a foreign buyer, covering the political risk (the buyer's government prevents payment) and commercial risk (the buyer defaults) associated with export transactions. This effectively allows the trading company to offer open account terms to buyers it would otherwise require LCs from, improving commercial competitiveness.

Working capital guarantees support the trading company's own financing by providing banks with a government guarantee covering the pre-export financing that the trading company needs to fund inventory and production ahead of export.

Accessing ECA support requires understanding the eligibility requirements (transactions typically must have a minimum domestic content percentage from the ECA's home country), the application and documentation process, and the premium cost of the support (which is charged to the exporter or buyer as insurance premium).