With additional security, you can grant a term of credit to customers who pose a certain element of risk. However, if you don’t want to take any short-term risks at all, you can always sell your foreign receivables to an export factoring company and the original credit transaction will turn into a cash deal. Approximately 10% - 20% of the claim amount is retained by the factoring company until the contract of sale is completed. The fees amount to approx. 2% of the secured claim plus the usual bank charges for advance finance. It is advisable to check in advance whether the cession of claims is generally possible in your customer’s country.
When you are wondering whether to accept a foreign order, you should not only take the client but also the client’s country into consideration. Besides the financial risks, there are also political risks concerned with exporting. Financial risks can be reduced by examining solvency, but political risks exist in different regions and your business partner has no influence over these. In general, economically and politically unstable countries are vulnerable. The Euler-Hermes Kreditversicherungs-AG, which awards state-run export insurance coverage for Germany, lists a number of countries which do not belong to the OECD (Organisation for Economic Cooperation and Development). This basically means those countries which do not belong to the EU, EFTA region, USA, Canada, Japan, Australia and New Zealand. When carrying out business dealings with such countries, loans may be secured by national export insurance (www.ausfuhrgewaehrleistungen.de).
Agreement on payment terms is also an important element of cross-border business dealings and you should pay absolute attention that “Incoterms” are applicable. These are internationally recognised terms which define the mandatory costs and risks to be carried respectively by the exporter or importer. In order to prevent misunderstandings, you should explicitly refer to the updated version, currently "Incoterms 2000".