Not every importer sourcing products overseas fully understands how global trade actually works. From the outside, it looks simple: you place an order, the supplier produces the goods, you pay, and that’s it.
In reality, the systems underlying international trade are far more complex, and most companies operate inside it without fully seeing the mechanisms that determine whether they are able scale or end up stagnating.
International trade is not a single system; it’s a fragmented structure involving multiple stakeholders across different jurisdictions. Buyers, suppliers, logistics providers, insurers, banks, and regulators all operate under different legal frameworks and incentives. No single participant has full control over the transaction. This fragmentation makes the system slow, rigid, and difficult to optimize. Every deal is, in essence, a coordination problem across borders.
The core problem is cash flow
There is a major constraint at the heart of international trade: cash flow. The traditional method of importing involves the importer making an upfront payment to the supplier, then waiting for the goods to arrive so they can be sold. The problem with this is that the importer’s capital gets locked into goods that are in production or transit. During this time, the money is effectively frozen in the least liquid form: inventory. Meanwhile, the business still needs to operate, place new orders, and grow. This constant pressure on working capital limits a company’s ability to expand its business.
In theory, banks should solve this problem by offering trade credit, meaning loans to facilitate imports. But in practice, banks rarely do this, and that’s especially true for small and mid-sized importers. Banks in the buyer’s country don’t know the supplier and have no leverage over them. Banks in the supplier’s country don’t know the buyer and can’t assess or enforce repayment. Add to that cross-border legal complexities, documentation burdens, and relatively short time frames, and the result is predictable: trade finance is unattractive for banks. This is why global trade remains one of the largest yet most underfinanced sectors.
Suppliers themselves are often willing to step in where banks won’t tread, and offer credit terms to their buyers. However, when it comes to foreign buyers, suppliers are often hesitant to offer trade terms, especially if they’re unfamiliar with the buyer and their overseas business.
A state-supported solution: Export credit insurance
These structural limitations mean the problem can’t be solved purely by private financial institutions. It requires a system where risk is centralized, assessed at scale, and supported by state-level incentives.
Fortunately for importers and exporters, there is already a system designed to solve exactly this problem: export credit insurance. At its core, it allows suppliers to insure the risk of non-payment from foreign buyers. Instead of taking on that risk themselves, suppliers transfer it to a specialized institution, making it possible for those suppliers to offer payment terms (typically 90 to 120 days).
This benefits not only the importers who can free up cash flow for investments and expansion, it also benefits suppliers, who can offer credit terms to buyers knowing they are covered in case of non-payment. This is an especially valuable tool at a time when global geopolitical risks are growing, and trade relationships between countries are increasingly unpredictable.
The institutions that provide export credit insurance differ from country to country. Export credit agencies, as they are generally known, can be fully state-backed, public-private entities, or private insurers, but their function is always the same: enabling trade by removing credit risk.
The largest exporting economies — China, the U.S., Germany, Italy, India and others — all operate through these systems. Export-driven economies understand the importance of facilitating trade credit; their competitiveness depends on it. This is how a huge share of international trade actually gets done, and one large impact is that it aligns incentives across all parties and provides better access to working capital, the key bottleneck in global trade.
Operating at a massive scale
Export credit insurance is actively used by hundreds of thousands of companies worldwide. Entire export economies are built on top of it. It quietly supports billions and even trillions in annual trade flows, enabling transactions that otherwise would not happen under traditional financing constraints.
One of the most prominent examples is Sinosure, China’s export credit insurance system. The country’s trade credit insurer, Sinosure (which stands for China Export & Credit Insurance Corporation), operates at a scale that defines global trade dynamics. In 2024, Sinosure underwrote around USD $1 trillion and served 227,000 clients.
This means that a significant share of Chinese exports are shipped with deferred payment terms, made possible by this risk infrastructure. Without it, some suppliers would not be able to extend credit, and buyers would be forced back into prepayment structures. For other suppliers, trade credit insurance means they are willing to extend larger amounts of credit to their buyers (or to extend credit to a larger number of buyers) than they otherwise would. This allows those suppliers to increase their volume and therefore their profit. Trade credit insurance is a win-win for importers and exporters alike.
But especially for importers, trade credit insurance changes everything. Instead of relying on local bank financing (which, as mentioned above, is often unavailable), they can access supplier credit from Chinese manufacturers directly through their suppliers. The question shifts from “how do I pay upfront?” to “how do I structure and access this system?”
How does it work?
The first thing to understand about the process is that, in most cases, it’s the supplier, not the buyer, who obtains trade credit insurance. The relevant export credit agency is the one located in the supplier’s country, not the buyer’s. So for example if you are an importer in Italy buying from China, the relevant agency is Sinosure, the China Export & Credit Insurance Corporation.
A Chinese supplier will register themselves with Sinosure in order to gain insurance coverage for their sales. However, any buyer whose purchases on credit are to be covered by the policy must also be approved by the credit agency. In some cases, the credit agency will be able to assess the buyer’s creditworthiness through available databases, but in many cases, the buyer will have to provide financial statements, credit reports and other documentation.
By assessing this documentation, the credit agency can determine whether it’s willing to insure credit purchases from this particular buyer, and then will set a credit limit – the maximum amount it’s willing to insure for that buyer. Once that credit limit is set, the supplier will be willing to offer trade credit to the buyer.
For companies that are unfamiliar with the process, there are businesses that offer turnkey services for importers who wish to obtain trade credit from their international suppliers. One such company is Axton Global, which helps importers all over the world obtain trade credit limits through China’s Sinosure.
If you don’t understand the system, you are at a disadvantage
For any importer, understanding how this works should not be optional. This is a fundamental layer of global trade, and companies that ignore it will have to continue to operate on prepayment terms, limiting their growth and competitiveness. Meanwhile, their competitors will use trade credit insurance to unlock supplier credit, improve cash flow, and scale faster.
If you are importing, you should treat this as a core business tool. Understanding how supplier credit works, how credit limits are issued, and how these systems operate is not a “nice-to-have” -- it’s a “must-have” that directly impacts your cash flow, your growth, and your competitiveness.
At some point, every importer hits the same ceiling: you either keep prepaying and limit your scale, or you figure out how to access structured payment terms and unlock growth. The trade credit insurance system exists for this exact reason. The only question is whether or not you choose to take advantage of it.
