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PAYMENT TERMS AND FINANCING

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Although Mexico is the United States' third largest trading partner, the lack of financial options for small- and medium-sized enterprises is often cited as the primary obstacle for U.S. companies selling to Mexico.

U.S. exporters should be aware that Mexican lending rates are higher than in the U.S., ranging from 15 to 28% per year (as of December 2010). While it is prudent for U.S. exporters to insist upon secure payment terms, especially with new business partners, consideration of the full spectrum of payment terms over time can help keep U.S. companies competitive with foreign competition in the market.

Payment Terms

When negotiating payment terms with a prospective business partner, U.S. companies are encouraged to keep a full range of options in mind, and know the risk level associated with each one. The U.S. Commercial Service report Getting Paid by Your Mexican Buyer identifies the main financing and payment mechanisms available to support U.S. exporters selling to Mexico:

  • Cash In Advance;
  • Confirmed Letter of Credit;
  • Open Account Terms;
  • Open Account Terms with Export Credit Insurance;
  • Documents Against Payment (D/P) & Documents Against Acceptance (D/A);
  • Export Finance by US Commercial Bank (USD (dollar) denominated);
  • Import Finance by Mexican Bank (MXN (peso) denominated);
  • Lines of Credit Available from Mexican Development Banks.

U.S. Government International Financing Programs

The U.S. Government offers a variety of international financing programs to support U.S. companies who are exporting. Assistance may come in the form of working capital loans, loan guarantees, insurance, lease financing, grants for major projects, and in some cases, financing for the foreign buyers of U.S. manufactured products.

The Small Business Administration offers financing packages specifically targeted to assist U.S. exporters expand overseas and fund export transaction costs or financing for the export of goods or services. SBA programs can provide the liquidity needed to accept new orders, enter new markets and compete more effectively in the international marketplace, such as their: Export Express Loan Program, Export Working Capital, International Trade Loans, and SBA and EX-IM Bank Co-Guarantee program.

The mission of the U.S. Export-Import Bank is to assist in financing the export of U.S. goods and services to international markets. EXIM provides export financing products that fill gaps in trade financing, by assuming credit and country risks that the private sector is unable or unwilling to accept, and by leveling the playing field for U.S. exporters by matching the financing that other governments provide to their exporters. EXIM provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing).

The Overseas Private Investment Corporation provides medium- to long-term funding through direct loans and loan guarantees to eligible investment projects in developing countries and emerging markets. OPIC achieves its mission by mobilizing private capital and providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.

The U.S. Trade and Development Agency funds various forms of technical assistance, feasibility studies, training, orientation visits and business workshops that support the development of a modern infrastructure and a fair and open trading environment. USTDA's grants support sound investment policy and decision-making in host countries and helps U.S. companies enter foreign markets and bid on infrastructure projects. In Mexico, USTDA is currently supporting a variety of infrastructure projects, including: airports, clean energy, Healthcare IT, marine ports, multimodal transportation, and water/wastewater environmental projects.

Getting Started in Mexico

Additional financing sources in Mexico include leasing, factoring, and the non-banking industry. For additional information and requirements about financing programs available for U.S. exporters and/or Mexican buyers of U.S. products, please contact:

Sylvia Montaño

Commercial Assistant

U.S. Commercial Service, Mexico City

Tel 011-52-55-5140-2633

sylvia.montano@trade.gov


Trade Finance Guide: A Quick Reference for U.S. Exporters
  • Become familiar with the various government programs designed to help your company finance its export transactions, and give it the capital to carry out its export operations.
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