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According to the World Trade Organization’s World Trade Report 2012, the U.S. is the world’s second largest exporter goods and the largest exporter of services in 2011. With over 95% of consumers living outside of the U.S., expanding your business internationally can provide access to many more potential customers.

If your company is considering global expansion, one of the most important tasks ahead will be to determine the terms of payment and your selection will be dependent on whether you intend to buy from, or sell to, the overseas market. Compared to domestic sales, which are

Credit Risks

As a buyer, your company may want inexpensive credit and in the case of commercial buyers, credit can provide better business opportunities, such as being able to resell goods first before having to pay for it.  As a seller, the high cost of the initial investment in producing the goods may make your company less willing to accept credit.

The choice of who will bear the credit risk can be thought of as a Pareto efficiency problem. Every deal struck upon between a supplier and a buyer will carry a certain amount of credit risk that is necessary to successfully carry