By Gor Sokolov, Director, Axton Global
Deferred payment terms can be highly beneficial for international companies who import from Chinese suppliers. One reason for this is that there is a long shipping period for Chinese goods which typically takes from 20-45 days, depending on the port of destination. The other reason is that importing companies may lack working capital needed to keep inventory sufficient or fulfill growing sales.
However, advanced payment terms are usually required by Chinese suppliers. What this means for your business is that you will first make a payment of 30% (upon the production of the goods) and then 70% (before the shipment of the goods).
Deferred payment terms can be beneficial, lasting from 90 to 120 days, but Chinese suppliers often decline to offer deferred payment terms for overseas buyers directly.
This is where Sinosure – a Chinese Export Credit Insurance Corporation – can assist your organization.
Why are Chinese suppliers afraid to sell their products on credit terms to overseas Buyers?
First, Chinese suppliers do not always have the required expertise and advanced tools to assess a buyer’s company for credit risks. So, although your organization might have a good financial standing, it is unlikely that you will be given delayed payment terms directly from your supplier.
Second, a single supplier usually does not have enough financial resources to bear the credit risk on its own; the supplier has a bankruptcy risk if the buyer doesn’t pay for the goods.
To make credit payment terms feasible, third-party assistance is needed to provide the necessary expertise and tools to assess and insure the credit risks. This is where Sinosure takes into action.
What is Sinosure?
Sinosure is a state-owned Chinese Export Credit Insurance corporation that protects Chinese exporters against credit risks in international trade. With a Sinosure credit insurance policy in hand, Chinese suppliers can sell their products or goods on credit terms without taking the credit risk. Sinosure guarantees the payment under the contract in case the buyer fails to pay. With Sinosure, Chinese exporters are really easy-going when negotiating deferred payment terms.
What is a Sinosure Credit Limit?
A Sinosure Credit Limit is the maximum amount of trade credits provided by Chinese suppliers to your company that Sinosure agrees to insure. For example, if your Sinosure-approved credit limit is 1 million dollars, you can purchase 10 containers that each cost 100,000 USD from different Chinese suppliers who are insured by Sinosure, with 90 days deferred payment. The credit limit is revolving, so once you pay for the previous order, you can use it again.
To get your company a Sinosure credit limit, your company should pass through a credit investigation procedure successfully. During the credit investigation procedure, the Sinosure underwriting department assesses your company’s financials and issues the credit limit. This is the crucial part.
Getting started with Sinosure: how does it operate?
As stated, to qualify, you will first go through a credit investigation procedure, following which you will get an approved credit limit and agree on the credit terms with your Chinese supplier.
Going through Sinosure means that your Chinese supplier will be compensated if you don’t make the payments for the exports, as Sinosure will collect payment.
The process of applying for a credit limit can be made simpler with the assistance of professional Sinosure consultants. These professionals will support your application. The credit limit application process takes approximately 21 days.
What are the advantages of working with Chinese suppliers through Sinosure?
Sinosure is a top choice among Chinese exporters, with more than 260,000 exporters using its credit insurance service; it also covers more than 90% of the Chinese credit insurance market. The fact that more than 700 billion yearly Chinese exports are backed by Sinosure insurance shows the sheer quantity of Sinosure-indemnified exports. This means that if you have your Sinosure credit limit approved, you will have the access to a broad network of suppliers who are able to trade with you on credit terms.
The other advantage is that good credit ratings in Sinosure help your company to get more trust from your potential supplier and gives you additional benefits when negotiating purchase prices and commercial terms.
This is a Sponsored Feature.