When exporting, don't forget the credit risk.

• Author: Braun, Kerstin
• Position: RISK

In his State of the Union address last January, President Barack Obama called for American businesses to double exports within the next five years. He has repeated his exhortation to export several times since. And for good reason.

[ILLUSTRATION OMITTED]

Small-and medium-sized companies are the engine of the United States economy. To remain competitive, American businesses have no choice but to export. Ninety-six percent of the world's population and 75 percent of its spending power are now outside of the U.S. Meanwhile, the relative size of the U.S. market for goods and services is shrinking.

Because of improved technology, transportation and communications, the world keeps getting smaller and smaller. For many American companies, staying alive will mean seeking new markets overseas. In addition to the obvious benefit of increasing sales, exporting offers companies a range of other benefits. Selling beyond the company's traditional sales territory can reduce its dependence on existing customers. It can expand the sales of existing products. In addition, exporting can enable companies to hedge against seasonal variations.

And the president has provided some actual support. His administration has increased by $2 billion the available capital to the U.S. Export-Import Bank, which helps American companies with credit, loans and issuance. The Small Business Administration, at the president's direction, has extended its Export Express program, which encourages and provides credit to exporters.

[ILLUSTRATION OMITTED]

For the economy as a whole, doubling exports would create an estimated 2 million new jobs, help level the U.S.'s lopsided balance of trade and assure continued prosperity. According to the U.S. Department of Commerce, every $1 billion added to the nation's exports means an additional 6,000 jobs.

Yet, despite the benefits, only about 10 percent of small- and medium-sized companies export. While American companies did export a respectable $1.1 trillion of goods and services last year, 70 percent of those sales were attributed to a handful of Fortune 500 companies. By contrast, in the European Union--which is roughly the same size overall as the U.S. economy--more than half of all companies export.

Overcoming the Obstacles

As anyone who has ever tried will attest: Exporting is not easy.

First, it's expensive. Should it be a dedicated sales force or agents? Also, a company's products may need to be adjusted to meet government regulations...