In order for any product to be competitive in a market, three conditions must be fulfilled: quality, competitive prices, and easy terms of payment. While not minimizing the effects of the first two conditions on the ability of product to complete with another, it is important to recognize that the third one (terms of payment) constitutes a principal motive for the preference of an important for certain commodity. It is beneficial to the Buyer to obtain a good based delayed payment terms to be fulfilled upon his sale of products. Therefore, export credit guarantee is important advantage and one of the most vital incentives for export activities.

Whereas commercial insurance offered by insurance companies provides exporters with protection against material hazards that might afflict the exported goods, such as damage, deficiency, theft, loss, or expiry, the guarantee covers legal incidents represented by the non-fulfilled of dues to the exporter, who, on the other hand, has fulfilled all his obligations towards the Buyer in terms of having shipped good that conform to specifications, on time and by the agreed-upon route. If the exporter does not have appropriate guarantee that enable him to obtain his dues, he will be reluctant to make transactions other than on the basis of immediate or advanced payment, or of guarantee payment terms such as confirmed irrevocable letter of credit, or he will be willing to carry out export operations only with buyers he has already dealt with and trusts. Such measures would limit the marker and contribute to non-competitive payment conditions.

Therefore, providing a guarantee to the exporters enables him to penetrate new markets, deal with new buyers confidently, and grant the easy payment terms. In addition, a guarantee will allow the exporter to receive financing for his activities with better terms, since the financing bank will receive its dues from the guarantee company if the exporter fails to obtain his dues from the buyer.

Hence, the advantages of the guarantee can be summarized as follows:

• Allowing the Exporter to penetrate new markets.
• Providing better conditions when competing with similar products in foreign markets by offering the buyer easy payment terms.
• Helping the exporter in obtaining financing with reasonable terms and protecting him in case of the bank's inability to obtain its dues from the buyer.
• Promoting the use of commercial papers related to export operations covered by the guarantee, since the parties dealing in these notes are certain of timely reimbursement and are protected during their use of these notes.