Colorado offers export credit insurance

Business America, May 13, 1985 by Jan Sandhouse Hurst

Colorado, through the Colorado Housing Finance Authority (CHFA), is the first state to offer exporters a way to insure their foreign receivables under the Umbrella Policy of the Foreign Credit Insurance Association (FCIA). FCIA is an agent of the Export-Import Bank of the United States, and this insurance is backed by the U.S. Government.

Colorado Export Credit Insurance is specifically designed for small exporters and for those companies which have little experience with exporting or export credit sales. The policy offers coverage of 90 percent of commercial risk and 100 percent of political risk, based on the gross invoice amount (sales price plus insurance, freight and other charges paid in U.S. dollars in the United States), on terms up to 180 days. CHFA has arranged for an experienced insurance broker, International Service Associates, to administer the policy so that there will be the beneficiary of the insurance, or he may assign his interest to a leading institution as security for financing.

Colorado Export Credit Insurance can give exporters peace of mind, knowing that their foreign receivables are insured by an agency of the U.S. Government. It can also provide a competitive edge, since more favorable terms can be offered to buyers while minimizing risks to the exporter. Cash flow improves since it will be easier to borrow against foreign accounts receivable by assigning the insurance proceeds to a bank.

The qualifications for participating are few and simple. First, the exporter must qualify as creditworthy to FCIA's underwriters. Second, export credit sales (exclusive of letter-of-credit or cash-in-advance sales) must have averaged less than $2 million annually during the past two years. Fourth, the exporter must agree to join an international trade association. In addition, a Dun & Bradstreet report dated within the last six months is required. FCIA requires an additional $35 payment, to be included with an application, to cover the expense of obtaining the D&B if one is not submitted with the exporter's application.

There is no minimum premium required under Colorado Export Credit Insurance. However, there is a one-time $200 non-refundable set-up fee. Premiums are payable on each shipment, based on the size and terms of the sale.

The exporter may choose the buyers to be covered by Colorado Export Credit Insurance. Once a buyer is covered, all shipments to that buyer must be insured. Each buyer must be approved by FCIA for a Special Buyer Credit Limit (SBCL), which is based on an application and supporting information which the exporter submits.

Colorado Export Credit Insurance covers losses arising from a foreign buyer's failure to pay for products shipped by an exporter pursuant to an agreement with the buyer. If the buyer becomes insolvent or does not pay his debt within six months from the agreed-upon date of payment, the loss is commercial and the coverage is 90 percent of the gross invoice amount. If the buyer does not pay because of specified political occurrences, such as war, revolution, expropriation of business, cancellation of import licenses or currency inconvertibility, the loss is political and coverage is 100 percent of the gross invoice amount.

The product sold must be shipped from the United States to an approved buyer in accordance with the Country Limitation Schedule determined by FCIA and in conformity with the laws of the United States and of the buyer's country. It must be produced or manufactured so that one-half of the value, exclusive of make-up, has been added by labor or material of U.S. origin.

The Colorado Housing Finance Authority is a public corporation which has sold over $1 billion in bonds and notes since it was created by the Colorado General Assembly in 1973. Since 1982, CHFA has been addressing small business financing needs in Colorado by developing programs to provide increased access to capital. CHFA is self suporting with operating expenses earned from fees and interest charges.

For more information about Colorado Export Credit Insurance, contact Jan Sandhouse Hurst at the Colorado Housing Finance Authority at (303) 861-8962, or call toll-free within Colorado at 1-800-332-3062.