A credit that carries a guarantee, issued by an export credit agency, protecting the creditor against political, commercial, or transfer risks in the debtor country that may prevent the remittance of debt-service payments.
Export Credit is given to exporters to cover various risks involved in export business including commercial and political risk. The various risk covered can be classified as:
- Insolvency of the buyer
- Default in payment
- Transfer delay
- Non acceptance (for government buyer’s only)
- War and internal disturbances in a buyer’s nation.
Criteria for Availability of Export Credit
Any company which has registered in Singapore can make avail of Export Credit. Export credit in Singapore is usually given for any exports from Singapore and in some selected cases to third country trade. The basic criteria taken into account are:
- Creditworthiness of buyers.
- Creditworthiness of buyer’s countries.
- Nature of transactions.
- Terms of credit involved.
- Spread Of Business Offered For Cover.
Cost of Cover
The cost of cover depends on the assessment of country, buyer risks, terms of payments and volume of business. A discount is possible at the end of an annual review of the policy.
Commercial Banks which are financing exporter’s transaction can ask for a guarantee on the concerned risk. Guarantees are given for both buyers and suppliers credits and the different types of guarantees include unconditional guarantees and letters of assignment.