Protect your business with trade credit insurance
Trade credit insurance ensures your business is protected from delayed payments from clients, making sure your business’ growth is not stunted by the actions of others. As insurance experts, we will discuss the details of trade credit insurance and why your business needs it.
What is trade credit insurance?
Trade credit insurance provides cover for businesses if customers don’t pay for their products or the services they receive, or if they only pay after the agreed payment date. This enables businesses to bring in new customers and improve their access to funding (often at more competitive rates). However, something to bear in mind when considering trade credit insurance is that it only applies to products or services that are due within one year.
What does trade credit insurance cover?
Trade credit insurance covers two types of business risks: commercial risk and political risk.
Commercial risk
Trade credit insurance can cover businesses for commercial risk. This means that they are covered when customers are unable to pay outstanding invoices due to their own financial situation, for example, if they have to declare insolvency or protracted default.
Political risk
Trade credit insurance can also cover businesses for political risk. This is when a customer/client fails to pay due to unexpected external events that are outside the policy holder/customer’s control. For example, wars, natural disasters or economic difficulties.
Why businesses should take out trade credit insurance
Trade credit insurance offers businesses flexibility and confidence within their company. This cover allows businesses to grow and push their potential, rather than staying stagnant. Not having trade credit insurance means that your company can fall into the rabbit hole of debts from clients, meaning in time, the significant debt that has been rising will cause your business to plummet, as growth and profit will not occur and liquidation of your business is highly possible.
Expanding sales
Trade credit insurance allows businesses to extend credit to new customers or comfortably sell more to existing customers.
Obtaining better finance terms
Trade credit insurance also has a positive impact on bank lending. If a bank sees that you have trade credit insurance, then it could help your chances of accessing more financial support.
Helping expansion into international markets
Trade credit insurance provides more security when exporting overseas. By having the security blanket of trade credit insurance, you business can flourish without having to turn down any international opportunities, which you may have had to decline in the past due to being in debt as a result of clients missing their payments.
