Why Consider Trade Credit Insurance?
Credit Insurance protects businesses from non-payment of goods and services sold on credit.
Consider the reality. On average, 40% of the assets in a manufacturing company and 80% of the assets in a service company relate to their debtor book. Moreover, the extra sales required to offset a loss of €50,000 for a business earning a pre-tax margin of 5% can be as much as €1,000,000. Such facts illustrate that ALL businesses should consider what the impact would be if a key customer or group of customers failed to pay their debts.
Companies operate in volatile environments and it is impossible to predict the failure of customers to settle their debts in a timely manner. Credit insurance acts as a safety net, reducing risk by protecting you from these unforeseen losses. So, ask yourself these questions:
• Would it benefit your business to be protected against bad debts?
• Would it be of benefit to increase your sales with the support of a global insurer covering the credit risk?
• Could you benefit from real time credit information on your customers so you are forewarned to any changes in their creditworthiness?
• Would it be beneficial to maximise your own credit rating and working capital position?
Benefits of Credit Insurance
• Protects Cash Flow – it protects businesses for the adverse effects bad debts have on cash flow and profitability.
• Increase Sales – by enabling you to sell more goods on credit to new and existing clients while substantially reducing your overall risk.
• Access to Independent Credit Information – Policy holders have online access to insurers credit rating systems which provides credit intelligence on existing and potential clients which may not be publicly available.
• Enhanced Credit Management – It complements your credit control procedures and provides early warning of changes in the credit worthiness of your customers allowing you to proactively manage your book.
• Saves Management Time – Both on researching the credit strength of new clients and ongoing credit management. Also insurance firms provide collections services should a bad debt arise thereby enabling management to focus on their core business.
• Promotes prompt payment – Late payers must be reported on the system. This alone can prompt payment as it will affect a company’s credit rating.
• Financing – Policies can be assigned to financial institutions to provide additional sources of finance.
• Increase Working Capital – Facilitates your business achieving a better credit rating with insurers and associated increase in credit limits.
In summary, credit insurance helps you to improve overall business performance and growth, enabling you to trade confidently, explore new markets, increase sales, improve cashflow and increase profitability.
Trade Finance and Invoice Discounting Network
Trade Finance and Invoice Discounting are closely linked to Credit Insurance as policies can be assigned to the Finance Provider which often provides the underlying security for the transaction.
CRB has established relationship with many Banks, Trade Finance & Invoice Discounting providers please contact us if you would like an introduction.