Credit where it's due

If you can answer 'yes' to any of the following questions, we may be able to help you.

  • Have any of your customers ever been or become insolvent?
  • Have you ever experienced a bad debt?
  • Do you regularly sell to new customers or markets?
  • Do you need help assessing the financial status of your customers?
  • Do you need to improve the cash flow of your business?
  • Do you need to secure improved bank funding?
  • Have you ever lost an order due to not offering open credit?
  • Can you make better use of a bad debt reserve?

How can credit insurance help your business?

The primary objective of credit insurance is to protect policyholders against unexpected credit losses caused by the default or insolvency of their customers (i.e. buyers).A policyholder can choose to insure export sales, UK sales, major customers or markets or a combination of these, and cover will generally be provided for 80-100% of the loss.

Other benefits of credit insurance include:

Early warning

Insurers have their own sources of confidential buyer information, which can help in reducing exposure to high risk businesses or avoiding them completely.  Policyholders therefore benefit from real-time analysis of their customers' financial status.

Secure expansion

Trade credit insurance can help sales by indentifying secure customers and providing protection where companies expand into new markets, encountering unfamiliar risks.

Financial access

Trade debtors typically represent up to 35% of a company's total assets.  Protecting the debtor book gives financiers additional security and often enables them to increase their valuation of a business for lending purposes.

Credit control

Trade credit insurance policies can form an integral part of a company's credit risk management procedures.  The policy requirements help to reinforce the disciplines within the credit control function without dictating to it.

Trade credit insurance in action

Example one

A glazing company is hit by a number of bad debts which could be catastrophic to its cash flow.  Fortunately, the business has credit insurance and is able to claim under it.  Without credit insurance, the company would not have been able to replace its working capital as quickly and, as a result, the company's funders may have lost confidence in its business plan.

Example two

Following a management buy out in the automotive sector, the client is asked to secure its sales ledger in order to set up a revised funding deal due to funding pressures during the 'credit crunch'.  The broker quickly sourced a credit insurance policy which satisfied the bank's requirements and secured further funding for the new venture.

For more information about credit insurance, please contact us.

Last reviewed 2/11/2011

To talk to an expert in your area and get a quote, contact your local insurance broker.