🎯 In 30 seconds: There are four common ways a foreign buyer pays you, and they sit on a ladder. The safer a method is for you, the less the buyer likes it. Start new buyers near the top (cash first or a letter of credit), move trusted repeat buyers down toward open account, and use export credit insurance and SBA-backed loans to make the riskier terms affordable.
The risk ladder
| Method | You get paid | Your risk | Buyer’s risk | Typical use |
|---|---|---|---|---|
| Cash in advance | Before you ship | Low | High | New buyers, small orders, custom goods |
| Letter of credit | When your documents match the credit | Low | Low to moderate | New or distant buyers, larger orders |
| Documentary collection | When buyer pays (D/P) or on a set date (D/A) through banks | Moderate | Moderate | Established buyers in stable markets |
| Open account | 30, 60 or 90 days after shipping | High | Low | Trusted repeat buyers, ideally insured |
trade.gov also lists consignment (the buyer pays only after reselling your goods). It calls this very risky for the exporter.
How each one works
Cash in advance is a wire transfer before shipment. A common compromise is a deposit with the order and the balance before goods leave. Avoid buyer-pays-by-card on large orders; chargebacks can reverse months later.
Letter of credit (LC). The buyer’s bank promises to pay you once you ship and present the exact documents the LC lists (invoice, bill of lading, insurance certificate and so on). Ask for an irrevocable LC, and if you doubt the foreign bank, have a US bank confirm it. LCs are relatively expensive, and trade.gov warns the documents are prone to discrepancies, which delay payment. A typo can cost you weeks.
Documentary collection. Your bank sends the shipping documents to the buyer’s bank, which releases them when the buyer pays (documents against payment) or signs a promise to pay later (documents against acceptance). Cheaper than an LC, but the banks do not guarantee payment. If the buyer walks away, your goods sit in a foreign port.
Open account is an ordinary invoice with payment terms. It wins orders, and it is where most losses happen.
Export credit insurance
The Export-Import Bank of the United States (EXIM) sells export credit insurance that protects foreign receivables against commercial losses (the buyer does not pay) and political ones (war, currency transfer bans). EXIM says it covers up to 95% of the invoice. It has a policy aimed at small businesses, the Multi-Buyer Small Business policy. Private insurers sell similar cover.
Worked example. You sell $40,000 on 60-day open account to a distributor in Colombia, insured at 95%. The distributor goes bankrupt. After the claim is approved, you recover up to $38,000 and lose $2,000 plus the premium. Uninsured, you lose $40,000. Insured receivables can also be easier to borrow against.
SBA export loans
The SBA guarantees part of a loan made by a participating bank. Figures below are from sba.gov as of October 2026:
| Program | Maximum loan | Max SBA guarantee | Used for |
|---|---|---|---|
| Export Express | $500,000 | 90% up to $350,000; 75% above | General export needs; the lender decides without prior SBA approval |
| Export Working Capital | $5 million | 90% | Making and shipping a specific export order; can apply before the sale is final |
| International Trade loan | $5 million | 90% | Equipment, buildings, working capital and refinancing to expand exports |
Ask your local US Export Assistance Center or SBA district office which lenders in your area make these loans.
Currency risk basics
- Invoice in US dollars and the buyer carries the exchange risk. trade.gov warns this can lose orders to rivals who quote in local currency.
- Invoice in their currency and you carry it. A 10% fall in their currency between invoice and payment turns a $40,000 sale into roughly $36,000.
- A forward contract from your bank locks today’s rate for a set amount on a future date, from a few days to about a year out.
For general borrowing basics see Business finance.