El Salvador - Methods of PaymentEl Salvador-Methods of Payment
The U.S. Commercial Service discourages sending shipments without agreeing to payment terms in advance and receiving proper bank documents. Advance payment or an irrevocable letter of credit are recommended for initial commercial transactions until a well-established relationship based on prompt payment and contractual obligations is established with the Salvadoran counterpart. Letters of credit (LCs) are among the most secure instruments available to international traders. An LC is useful when reliable credit information about a foreign buyer is difficult to obtain, but the exporter is satisfied with the creditworthiness of the buyer’s foreign bank. An LC also protects the buyer since no payment obligation arises until the goods have been shipped or delivered as promised.
Open account transactions among established business partners are used in El Salvador. The goods are shipped and delivered before payment is due, usually in 30 to 90 days. This payment method is the most advantageous option to the Salvadoran importer in cash flow and cost terms, but it is consequently the highest risk option for the U.S. exporter. However, with the use of one or more of the appropriate trade finance techniques, such as export working capital financing, government-guaranteed export working capital programs, export credit insurance, export factoring, etc., the U.S. exporter can offer open competitive account terms while substantially mitigating the risk of nonpayment by the foreign buyer.
Factoring is offered by most banks operating in El Salvador and few private companies, such as Quedex and Inter Corp.
Local credit-rating agencies should be authorized by the financial system supervisor (SSF), four companies have been approved to manage credit and financial history in El Salvador: INFORED, Transunion El Salvador, Asociacion Protectora de Creditos, and Equifax Centro America.
Primary credit and charge cards used in El Salvador are, in priority order, VISA, MasterCard, and American Express. According to legislation, the maximum interest rate for credit cards and loans is 1.6 times the simple average effective rate established by the Central Bank.
Collection agencies are not regulated and often times run by legal professionals. The most visible collection agency in El Salvador is Puntual S.A. de C.V. One option for U.S companies is to work with reputable law firms that offer extra-judicial collection services.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Open account transactions among established business partners are used in El Salvador. The goods are shipped and delivered before payment is due, usually in 30 to 90 days. This payment method is the most advantageous option to the Salvadoran importer in cash flow and cost terms, but it is consequently the highest risk option for the U.S. exporter. However, with the use of one or more of the appropriate trade finance techniques, such as export working capital financing, government-guaranteed export working capital programs, export credit insurance, export factoring, etc., the U.S. exporter can offer open competitive account terms while substantially mitigating the risk of nonpayment by the foreign buyer.
Factoring is offered by most banks operating in El Salvador and few private companies, such as Quedex and Inter Corp.
Local credit-rating agencies should be authorized by the financial system supervisor (SSF), four companies have been approved to manage credit and financial history in El Salvador: INFORED, Transunion El Salvador, Asociacion Protectora de Creditos, and Equifax Centro America.
Primary credit and charge cards used in El Salvador are, in priority order, VISA, MasterCard, and American Express. According to legislation, the maximum interest rate for credit cards and loans is 1.6 times the simple average effective rate established by the Central Bank.
Collection agencies are not regulated and often times run by legal professionals. The most visible collection agency in El Salvador is Puntual S.A. de C.V. One option for U.S companies is to work with reputable law firms that offer extra-judicial collection services.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.