CE Export Financing & Risk Management Flashcards

What is 'country risk' in the context of export financing?

Answer: The probability of financial loss due to political or economic instability in the buyer's country

Country risk encompasses political instability, currency inconvertibility, war, and government actions in the buyer's country that may prevent payment.

Which SBA program provides loan guarantees specifically to small businesses seeking to export goods or services?

Answer: SBA Export Working Capital Program

The SBA Export Working Capital Program guarantees up to 90% of loans for export-related working capital, helping small businesses finance export transactions.

What is forfaiting in international trade finance?

Answer: The purchase of medium-term receivables from exporters at a discount on a non-recourse basis

Forfaiting involves a financial institution purchasing export receivables at a discount without recourse to the exporter, transferring all risk to the forfaiter.

Which payment term carries the MOST risk for the U.S. exporter?

Answer: Open account

Open account terms mean the exporter ships goods before receiving payment, bearing all credit risk if the buyer fails to pay.

What does 'recourse' mean in export factoring?

Answer: The factor can return unpaid receivables to the exporter if the buyer defaults

In recourse factoring, if the buyer doesn't pay, the factor can demand the exporter repurchase the receivable, leaving credit risk with the exporter.

Which EXIM Bank product is best suited for a small U.S. exporter needing to cover a single large export transaction against buyer default?

Answer: Single-buyer export credit insurance

Single-buyer export credit insurance from EXIM Bank covers a specific transaction with one overseas buyer, protecting against commercial and political risks.