Founded in 1987 in Odessa, Texas, Westech Seal is a small business manufacturer of mechanical seals and related components for centrifugal pumps. They have supplied seals to well-known companies – including Texaco, Exxon-Mobil, and a network of over 200 distributors across the United States. Despite its success domestically, the company recognized that there was enormous growth potential in international markets.
The first challenge to entering new international markets was the risk of nonpayment by international buyers, which can be devastating to a small company’s financial health. The second challenge was intense global competition. Westech Seal CEO Mark Merritt found that someone somewhere was always willing to make similar products for a lower price.
Working with EXIM, Mr. Merritt was able to address both of these problems. EXIM’s Export Credit Insurance provides 95% coverage of the foreign accounts receivable to protect Westech Seal from nonpayment. Nonpayment would have a significan impact on its cash flow and bottom line. Having export credit insurance also positioned the company strongly against competitors in foreign markets by empowering Westech to offer open account credit terms to international customers.
The ability to offer account credit terms and knowing itsreceivables were covered was a clear differentiator for Westech Seal. While some competitors were able to offer less expensive products, Westech Seal’s ability to offer open account credit terms made them more attractive to buyers. The company now exports to Canada, Israel, Bahrain, Kuwait, Saudi Arabia, and many other countries.
As an added bonus, export credit insurance also improved Westech Seal’s liquidity. Most commercial banks will exclude foreign receivables from a company’s borrowing base unless the receivables are insured against nonpayment. With EXIM's insurance, the company’s foreign receivables were included in its borrowing base, providing the working capital needed to fulfill its international sales orders.