Trade Credit Insurance Overview
Trade Credit Insurance protects businesses against bad debts caused by the insolvency or protracted default (inability to pay) of business customers, following the sale of goods and services on credit terms in both domestic and export markets.
Credit Insurance policies can be structured in a multitude of ways such as Whole Turnover cover, Key or Single Account cover, as well as Top Up and Excess structures, to name a few. The Credit Insurance market is constantly evolving with Insurers regularly adding to their product suites in order to increase their offering to organisations of all sizes, from small family firms to listed PLCs and large multinationals. As a leading credit insurance broker, it’s our responsibility to keep pace with these developments to assist our clients in finding the most appropriate solutions.
The Benefits of Credit Insurance
Protects from bad debt
Identifies potential losses: Access to key credit risk analysis from insurers on your client, their sector, and political risk gives invaluable insight to help avoid losses.
Transfers risk to insurer’s balance sheet: Credit insurance removes the credit risk from your balance sheet, which improves your margin and bolsters your P&L.
Reduces bad debt provision: As potential losses are covered, you can reallocate excess bad debt provision as working capital.
Empowers business growth
Promotes sales growth whilst maintaining controls: The enhanced credit management processes reinforced by credit insurance allow you to safely extend payment terms to customers in existing and new or developing markets.
Directs and supports sales to higher margin markets: Top or key account cover is available to support sales to specific or high-level margin markets.
Supports mergers and acquisitions: Credit insurance provides investee companies with protection against bad debt from acquired or merged customer portfolios.
Enhances working capital
Facilitates access to finance: Having credit insurance can increase your credit rating giving access to improved and more economical levels of finance.
Balance sheet engineering: You can use the debtor asset on your balance sheet to free up working capital by unitising invoice discounting or factoring.
Cost effective security provision: Credit insurance can act as a cost-effective replacement for expensive bank guarantees and letters of credit.
Embeds credit management disciplines
Enables companies to extend credit terms: As your shipments are covered, the fear of “not getting paid” is removed meaning you can offer extended payment terms to customers, giving you a competitive edge in your market.
Reinforces credit management processes: Disciplines within a credit insurance policy support best practice and sound credit management processes, reinforcing and enhancing your existing procedures.
Access to credit risk expertise and analysis: Support is available for setting credit limits on your customers and, in the event of a claim, the management of recoveries and salvage.
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