A surprising export trade risk: The most usual credit loss scenario is a familiar client that does not pay its invoices

For enterprises getting into the field of the export trade, the crucial obstacle may be the fear of credit losses. It is often believed that risks are associated with new clients. However, credit insurers’ experiences indicate that the most usual credit loss scenario is a familiar client that cannot pay its invoices after all. Enterprises can protect themselves from this risk, too. An export trade financing tour, aimed at the improvement of financing knowledge in SMEs involved in exports, started in Jyväskylä on 26 September 2018.

The nationwide tour will continue until spring 2019, and events will be organised at least in the following cities: Helsinki, Tampere, Seinäjoki, Rovaniemi, Oulu, Turku, Lappeenranta, Joensuu and Kuopio. The plan is to organise regional events later in Lahti, Vaasa, Hyvinkää, Mikkeli, Kotka, Pori and Rauma.

The tour is based on the results of the export trade financing barometer commissioned by Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC. The results indicate that SMEs involved in the export trade need more information about both export trade financing and protection from credit risks.

“The means of protection from risks are not well-known in Finland, and therefore the fear of credit losses may hinder an enterprise’s entry into the export trade. The significance of financing as a competitive factor in the international market is not well-known either, especially not to SMEs involved in the export trade. The competitor countries are better than Finland in using buyer financing as part of sales, and success in the international competition requires the mastery of all competitive means. These are the themes we highlight during the tour, and the goal is to encourage SMEs into the export trade and, as a result, increase Finland’s total exports,” says Regional Director Mikko Vänttinen, who was present at the first tour event as Finnvera’s representative.

The tour is organised jointly by Finnvera, Finland Chamber of Commerce, banks and credit insurers. In addition, participants in the Jyväskylä event included the bank Keski-Suomen Osuuspankki and the credit insurer Atradius Suomi that provided more information about financing options and risk protection. Jyki Group Oy, a company that specialises in the manufacture of heavy-duty trailers, and the sawmill group FM Timber Oy from Central Finland shared their experiences of the international market.

Silenta’s growth targets are associated with the export trade – new perspectives from the financing workshop

The fact that export trade credit losses occur most often when doing business with a familiar client was a surprise to Silenta Group’s CEO Heidi Neuvonen, who participated in the financing workshop in Jyväskylä.

Silenta manufactures and develops various types of hearing protectors for industrial, military and recreational needs. Nowadays, more than half of Silenta’s production is exported, with its products being sold in over 70 countries. The enterprise’s growth targets are specifically associated with export trade as potential new clients can mostly be found abroad.

“In its export activities, Silenta Group has clear operating principles, and everyone knows their responsibilities. However, an actual written credit policy has not been drawn up. The event’s speeches and discussions definitely opened up new perspectives. At Silenta, we have considered export credit policy mainly from the point of view of sales, while it might be necessary to take the entire supply chain into account,” Heidi Neuvonen comments.

“The challenges of international trade must be understood, and the enterprise must know how to prepare itself for them. For instance, payment cultures in different countries differ from the Finnish way of operating,” says Neuvonen.

Surprising situations are more likely to arise in connection with different trade restrictions or changes in the political environment that are beyond the exporter’s control. Such situations include, for instance, Brexit, customs duties or sanctions, which currently affect trade in different markets.

Nevertheless, from the point of view of export trade financing, the key point is that, whether the risk is commercial or political, there are means of protecting the enterprise from risks. The essential thing is to contact the provider of financing in good time for trade negotiations.

Read more about the tour, locations and dates.