Accounts Receivable are always the greatest asset of a company. If your consumers are reluctant to pay what they are supposed to, there could be a danger to your company from future credit defaults. Trade credit insurance, also known as export credit insurance, is a type that transfers risk against non-payment to companies trying to protect their account receivables.
What kind of business benefits from this insurance?
Trade credit insurance, as a credit protection tool, helps you to cover your receivable accounts and reduce credit risk at a reduced price. You can safeguard your cash flow up to a given credit limit by insuring your invoices and credit portfolio with a Niche Trade Credit policy.
Whether it’s a small start-up or a foreign investor new to a country, firms big or small will benefit from credit insurance across a variety of industries. Essentially, the best applicants for credit protection are any enterprise that offers products or services and provides credit to clients.
Although credit insurance will support all businesses working in high-risk sectors, certain sectors, like mining, oil, automotive firms, and metal will support more from commercial credit insurance.
Keep in mind if the cumulative value of your receivables is sufficient to impact your goods, services, or your business before determining if your company will benefit from credit insurance.
You do not want to wait to buy commercial credit insurance until your balances are unpaid. It can be very late, as at this point, or because of high risks, they may pay higher prices.
What are the benefits of this insurance?
- Improvements in Sales
Firms with this type of insurance can increase their sales by providing better credit terms to customers and prospects while reducing the use of expensive letters of credit.
- Entry to the new market
Trade credit insurers provide insurance against particular export risks by supplying undertakings with the required business information for informed decisions to be made in international markets.
- Protection from insolvency
This type of insurance protects companies against the possibility of consumer loss or insolvency when it comes to transactions purchased on credit terms.
- Relief in a cash balance
When a company’s clients become insolvent, trade credit insurance offers cash flow relief. Losses will be paid for, helping the organization to retain its cash flow.
- Reducing the possibility of accumulation
It reduces risks for enterprises whose bottom line depends on a few selected customers.
- Services for collection
Access to cost-effective collection services is provided by trade credit insurance.
- Facilitate lending by banks
Banks will usually provide firms that insure their receivable accounts with more favourable credit conditions.
In addition to providing a company with financial security, many businesses have leveraged their credit insurance as an investment platform to help their companies grow. For instance, firms can use this insurance as a credit line to support consumers and even sell to foreign companies, which can help make businesses bigger and grow worldwide, while at the same time minimizing costs.