An overview from the New Zealand Export Credit Office (NZECO) on key areas to keep in mind around export credit when doing business in India.
- Typical terms of trade sought by Indian buyers range between 30 – 90 days. If an exporter cannot negotiate advance payments, then the NZECO recommends seeking letters of credit as a means of securing payment, particularly if it is a new business arrangement.
- If an exporter is unable to negotiate a letter of credit or other forms of documentary collection, then the NZECO recommends an exporter obtain trade credit insurance on any open account trade.
- The primary benefit of trade credit insurance is covering the risk of non-payment due to certain commercial and political events. It is also a good way of ensuring due diligence is undertaken on a Buyer – if a trade credit insurer declines cover on commercial grounds, then this should be a warning to an exporter looking to offer credit.
- Another benefit of trade credit insurance is that it may enable a proven exporter to obtain a trade finance facility from its bank to help fund the period between paying its suppliers upon shipment of the goods and receipt of the final payments.
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