Trade Credit Insurance

Trade Credit Insurance: An overview

Trade credit insurance is protection for your businesses against the possibility of non-payment. Essentially, when trading on credit terms there is a risk that the business, they are dealing with will not be able to pay, this could be for many reasons but the most common is insolvency. This bad debt that occurs to the businesses can have dramatic impacts, for example it could slow expansion, hinder cash-flow or put the business at risk of collapse.

A business that loses $50,000 as the result of non-payment, will have to sell another $1,000,000 worth of goods at a 5% profit margin to recoup these costs. Trade credit insurance not only protects a business from a situation like this, but it gives directors and owners peace of mins that they will be protected - and puts cash back in their pocket!

Why consider Trade Credit Insurance?

Why consider Trade Credit Insurance?

Preserve your profit

On average about 40% of a company’s assets are from the debtors ledger, a significant part of your business that should be protected. A bad debt reserve is not the answer. It won’t put cash back in your hands.

Protect your liquidity and cash flow

Apart from the long-term loss of a customer and future revenue streams, there is the immediate effect on cash flow, which could even lead to your own business failing. The proceeds of a credit insurance claim injects liquid funds back into your business. We can arrange a virtually unlimited cash reserve for the balance sheet at a planned deductible cost.

Confidence to expand

You can grow your business in confidence knowing that the cost of potential customer failures is already covered. You can also be more aggressive in your sales and marketing by extending higher and longer credit terms with your customers.

Strengthen your credit management

Whether you trade with customers domestically or internationally, your customer’s status can be affected by internal and external factors, unknown to you. No matter what credit control procedures you have in place, you can further enhance the quality of decisions made on credit limits by working closely with us and gaining access to our extensive knowledge database. You can spend less time worrying about venturing into new markets or territories and be ‘in the know’ about the customers you are dealing with.

Who is Trade Credit Insurance for?

Who is Trade Credit Insurance for?

The market for trade credit insurance is wide and varied and is suitable to all businesses who trade on credit terms. Generally, it becomes cost effective when a business turns over more than $2 million per year, but there are exceptions.

A specialist trade credit insurance broker will assess many aspects of a business before approaching the market, as this process is taking place, the specialist broker will assess different structure types and policy variations will be considered to give the client the best solution. The most common is whole of turnover, this is where all sales are covered for the policy period and the insured can claim in the event of non-payment.

How to minimise the risk of a bad debt?

How to minimise the risk of a bad debt?

Trade credit insurance is the ultimate protection against a bad debt, but there are many things a business can do to help reduce the chances of this happening. For example, business should:

  • Know who they’re trading with, confirm they are dealing with the correct entity
  • Have up-to-date terms and conditions that clients agree to
  • Have a robust assessment criteria, set a process to evaluate the potential customers and stick to it
  • Set specific credit limits and make sure they’re justified
  • Ask themselves, would you lend $100,000 to a mate without assessing their ability to pay?
Contact us

Contact us

Trade Credit Insurance is a valuable risk management tool that can protect a business from financial losses due to non-payment or other credit-related risks. It provides a safety net for businesses, allowing them to operate with confidence, expand their customer base, and navigate uncertain economic conditions more effectively. Get in touch with Network insurance’s Trade Credit Insurance expert and find out how we can partner with you to protect what matters for your business.

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