Sinosure-Guaranteed Credit Limits for Italian Importers: An Axton Global Case Study

Italian companies import significant volumes of goods from China. As one of the highest manufacturers in the EU, the country specifically imports a large number of raw materials, machinery and equipment from China. They also import many types of agricultural products, in addition to textiles, materials and sewing accessories. Each year, the number of imports, including electronics and household goods increases, and to ensure their supply chain is stable, beneficial payment conditions are required.

More specifically, Italian importers seek to procure postponed payment conditions from Chinese suppliers. However, given that the COVID-19 pandemic has led the creditability of Italian companies to decline considerably, many Chinese suppliers do not want to take the risk of offering postponed payment terms to their Italian importers. To this end, the Sinosure credit insurance tool is ideal, covering many bases – such as political and credit risks. We have written this article to explain how we assisted our Italian clients in using the Sinosure credit insurance tool.

During the year 2020 the number of Italian customers who came to us having been declined favourable credit terms was high. The main cause of this was the COVID-19 pandemic. Many suppliers were reluctant to extend deferred payment conditions to importers, mainly because of the imposed lockdowns.

Many suppliers feared that the lockdowns would lead Italian importers to suffer a lack of working capital. They feared their Italian importers would not be able to keep up with the repayments

What helped with this, though, was the Sinosure insurance organisation. Sinosure amplified their backing, ensuring that the exports of Chinese suppliers remained high. It was Sinosure that also enabled Chinese exporters to recover financially, following the lockdown in China.

With the 2019 Memorandum of Understanding signalling a strengthened level between Italy and China, Sinosure even increased the insurance amount to 20% in 2020. It was because of the Sinosure short-term insurance backing of exporter credit limits that suppliers were more comfortable exporting goods to Italian importers under favourable credit terms (as well as other countries). Although the global economic state of affairs had declined, Sinosure kept things moving forward.

At Axton Global, we offer extensive consulting services that make obtaining a credit limit from your Chinese supplier simple – credit limits that are guaranteed by Sinosure. Not only are we here to ensure you receive the highest feasible credit limit, but we also endeavour to make credit limit negotiations with Chinese suppliers straightforward. We also handle the paperwork and essential documents required to initiate the process.

One of our clients, a wholesaler of apparel, required forklift machinery to use in their warehouse. The apparel wholesaler wanted to ask for the machinery from their Chinese supplier under postponed payment conditions that would be backed by a Sinosure guarantee.

In this case, however, the wholesaler was unsuccessful in obtaining their credit limit. This is because Sinosure declined to set one up.

The Italian wholesaler, therefore, solicited Axton Global's services to rectify the issue, which we approached by first getting to the bottom of why the credit limit was not initially granted. The three reasons why the credit limit set up was declined were:

1. Financial information about the customer's company was not readily available.

2. There was no history of trading information between the Chinese supplier and the wholesaler.

3. The different code of activity meant that the Italian wholesaler company was an apparel wholesaler company and the forklifts they wanted to import were not consistent with their company documents.

Here is how Axton Global solved these problems:

1. First, we sourced and pulled together the financial information, reports and questionnaires that the Sinosure underwriter required to set up the credit limit. We sent these documents on to the insurer.

2. We also provided Sinosure with some explanatory documents that would clarify why forklifts were required by the wholesaler. These documents also explained why the required machinery was not in the company's code of activities.

3. We then submitted the wholesaler's credit limit application again to initiate the investigation process once more.

Following these steps, the company was successfully granted a credit limit.