Trade credit insurance, provides a business with protection against the failure of a customer to pay their trade credit debts. This can arise as a result of a customer becoming insolvent or because your customer fails to pay within the agreed credit period. These risks are referred to as ‘commercial risks’. The protection covers as standard goods or services sold and delivered, but can be tailored to cover many other risks such as work in progress and binding contracts.
Companies that export can protect themselves against a range of ‘political’ risks which may prevent or delay payment. Examples include war or civil war in your customer’s country; cancellation of the contract by the government of your customer’s country; or governmental regulations such as embargo or quotas that prevent the export or import of goods.
Research suggests that 18% of companies that fail do so because they have experienced bad debt or poor working capital. Businesses protect their tangible assets such as property and plant, but often neglect to cover their receivables which can represent 40% of their current assets.
Credit insurance can reduce the unnecessary cost of bad debt and protect hard-earned success, and provide the cornerstone of secure growth.