Companies seeking to mitigate their risk on foreign receivables sometimes find themselves having difficulty in differentiating trade credit insurance from the services offered by Exim bank.
On the surface, there appears to be little difference in the function of Exim bank compared to private firms offering trade credit insurance. Exim bank was established as the Federal Government's way of trying to help businesses offset risk and actively encourage exports of American goods. Some services offered by Exim bank parallel those offered by trade credit insurance firms.
However, the major difference in the two is the simple fact that the Exim bank is a part of the US Government, and anything attached to the federal government means regulation. The drawbacks of using the services of Exim bank are many. In addition to the high expense typically associated with an Exim Bank policy, as a part of the US Government, Exim bank has numerous regulatory hurdles that must be overcome, while trade credit insurance is a simple contract between two private companies allowing for the most flexibility . Additionally, Exim bank has on more than one occasion received negative press indicating that it discriminates politically by offering its services to those special interests that powerful political groups favor while leaving those without such connections to fend for themselves.
Any company trying to decide between the services of the Exim bank and acquiring a trade credit insurance policy privately would do well to consider the political ties of the Exim bank. A company wishing to control its risk without being forced through extra regulatory hoops or being required to do business with only those parties favored politically would do well to keep in mind that a private trade credit insurance policy allows a company greater flexibility to do business as they are usually accustomed. Using Exim bank can mean the possibility of navigating a political swamp causing frustration for policyholders.