Trade Credit Insurance
Trade credit insurance is a risk management tool that protects your business from bad debts.
It insures your accounts receivable and protects your business from unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer. Credit insurance coverage is available for both your domestic and/or export customers and provides flexible coverage that can be tailored to meet your needs.
Trade Credit Insurance is also known as debtor insurance, export credit insurance and accounts receivable insurance.
How Does Trade Credit Insurance Work?
What is Trade Credit Insurance?No matter how careful you are, your customers can sometimes fail to pay. Unless you demand payment up front or are covered by credit insurance, this makes you vulnerable to bad debt.
Can your business afford a bad debt?
Credit insurance protects your cash flow. It covers your trade with your customers, so that you still get paid even if they go under or fail to pay you.
Trade credit insurance works by insuring you against your buyer failing to pay, so every invoice with that customer is covered for the insurance year up to the terms of your policy.
It’s used by businesses of all sizes to protect both international and domestic trade. Businesses also use credit insurance to help them secure finance and working capital with banks, explore new markets with confidence and attract new customers with favourable credit terms.
Protection for businesses of all sizes?As with all types of insurance, there is no one-size-fits-all approach. The level and cost of your credit insurance will be dictated by your needs. For example the size of your credit portfolio, level of risk associated with your customers and location of your market will be unique to your business. Most trade credit insurance solutions will therefore be tailored to your requirements.
At Dashwood Bond Trade Credit Insurance, we operate a Modula Credit Insurance Policy. This allows us to tailor the policy to your needs.
Benefits of Trade Credit Insurance
Protecting your accounts receivable from potential bankruptcy is only part of the benefit this type of debtor insurance can provide. In addition to protecting your business from the risk of insolvency, it can help:
- Grow your customer base as potential buyers may be attracted to your credit terms
- Enhance trade providing you with the confidence to develop and expand your market
- Guarantee cashflow enabling you to build strong relationships with your suppliers and employees
- Safeguard customer relationships through improved communication and enhanced credit terms
- Improve your access to finance and your relationship with your bank
- Meet the risk management requirements of your stakeholders or board and provide peace of mind
- You might be able to use credit insurance as a tax-deductible business service. It can be a requirement of your management board and you might find it a great asset when seeking finance from banks. Credit insurance is suitable for all businesses, from SMEs to large multinationals.