If you’re new to Trade Credit, then you’re in the right place to find out more.
We are often asked what Trade Credit insurance is, as many companies are simply unaware of its existence.
What is Trade Credit insurance? In its simplest form, it is a way in which companies can protect themselves if customers who owe your company money are unable or unwilling to pay.
Businesses prosper in times of certainty and stability and good cash flow is vital to ensure the smooth running of any business. That’s where Trade Credit insurance can help – it enables you to do business in the knowledge that if your customers don’t pay, you have a back-up plan.
Doing business in the knowledge that if you don’t get paid by the customer, the insurer will step in.
There are many reasons people might not pay you – insolvency, lack of cash, or delays in them being paid themselves. So, it’s a huge advantage to be able to put something in place that puts you in control. It’s important to understand that Trade Credit insurance is not a “one size fits all” solution but is a bespoke and personalised service tailored to each company we work with. It’s suitable for businesses with a turnover of more than €100k who offer credit to their customers.
Trade Credit insurance is about much more than financial protection. It can provide access to highly valuable reports about the ‘health’ of the companies you are planning to do business with, sector insight and activity in the marketplace – all of which can enable businesses to implement growth plans with confidence, and be in control of the company’s future direction. Trade Credit can free up capital which can be used for growth, making it a genuine asset for your business and enabling you to determine the direction your company is going in.
All of which means Trade Credit insurance offers certainty in an uncertain world.
Trade Credit insurance, also known as Credit insurance, covers the risk of bad debt where a customer is unable to pay for goods or services that have been provided on credit terms, subject to relevant policy conditions being met. The policy guarantees that the insured debts will be paid even if a customer is insolvent.
The information on every company will change during a 12-month period and insurers will continually review all information, as would uninsured companies. Insured credit limits may decrease or increase in light of this information and any goods or services provided with Credit insurance in place remain insured until those goods or services have been paid for. Where goods and services were covered, credit cover can never be taken away, only future orders will not be covered.
Our clients are often surprised at how much cover is available across their entire debtor book. Many companies then use credit insurance to increase sales – offering higher levels of credit to their customers with the confidence that comes from knowing the credit risk is insured.
Any company can get into financial difficulty and any company can become insolvent. Some companies are better credit risks than others and the price of Credit insurance can reflect the risk on your debtor ledger.
Credit insurance provides cover for risks going forwards and there is always the risk of a bad debt. It is good practice to understand the potential risk of a bad debt and to consider insurance before a bad debt occurs.
Credit insurance is a highly cost-effective way to replace a bad debt reserve and to free up cash that can be put to much better use in your business.
Invoice finance of any type is a funding solution which may or may not include Credit insurance (or Debtor Protection). Debtor Protection linked to invoice finance may or may not be the most suitable or cost effective way to manage your own company’s trade credit risk. Our team will advise on alternatives so you can make an informed decision.
As soon as you know your customer has become insolvent or is unable to pay, you should contact our experienced trade credit team who will see you through the claims process. You will typically receive 90% of the value of insured debt. Claims will usually be settled within 30 – 60 days of the claim and supporting documents being submitted depending on the value / complexity of the claim.
In general terms, a Credit insurance policy insures the risk of non-payment – ‘picking up the bill’ if the buyer can’t/won’t pay. T&C’s apply.
No, you don’t have to insure all of your customers. When you work with our trade credit team, they will look to provide you with exactly the cover you want. That may be individual contracts, individual customers, a selection of customers or all of your customers.
The price is dependent on a variety of factors, including the nature of your business, the quality of your credit management processes, and the strength of your customers. Get in touch with our team for a quote; we are sure our price will not be beaten for the quality of cover we arrange.
Trade Credit insurance is a niche product that requires careful risk assessment. It is therefore important to work with an insurance broker who has the knowledge and capabilities in Trade Credit insurance to ensure your business has the appropriate cover in place.