Account receivables are often the largest asset of the company, and in case your customers are unable to pay what they owe, it can pose a serious threat to your business, and therefore, it is indispensable to go with a trade credit insurance. The policy keeps your business afloat by offering the following benefits: =
- Improve Sales: Those businesses which have trade credit insurance can increase their sales by providing more favourable credit terms to their customers. It diminishes the need of having a costly line of credit.
- Access to new markets: Trade credit insurance companies help in curtailing the export risks by offering businesses with the market knowledge which can help them in taking favourable business decisions in the international market. With a trade credit insurance in place, you are armed with a viable financial and economic information source which helps you develop business with successful partners, proving that the policy plays a crucial role of a strong marketing tool as well.
- Insolvency protection: When it comes to sales which are made on credit terms, a trade credit insurance safeguards the companies from the risk of a default or insolvency of the customer.
- Cash flow relief: If the business has a trade credit insurance, it can enjoy cash flow relief if its customers fail to make a payment on time or become insolvent. It means, losses can be indemnified, which allow the business to maintain its cash flow.
- Facilitate easy bank financing: Usually, banks will give more favourable lending terms to those businesses which insurer their accounts receivable with trade credit insurance. A trade credit insurance can be used to give security to a lender for trade or export finance. In certain cases, your bank may actually ask for credit insurance before sanctioning your loan.
- Minimise concentration risk: A trade credit insurance helps in mitigating risks for businesses whose existence depends on a selected number of customers.
Further, the trade credit insurance can also include a component of political risk insurance which assures to give coverage against the risk of non-payment by foreign buyers due to political unrest, currency issues, etc.
If we talk about the claim process, then unlike other insurance policies, trade credit insurance policy comes with a waiting period of usually five months. It means the policyholder gets an option to grant extensions to the debtors for payment up to the maximum credit period as mentioned in the policy document. The policyholder can provide this extension without paying any extra charge and obtaining prior approval.
There are various types of trade credit Insurance policies which are available in the market. Whether you are interested in insuring your entire customer base or just looking for a policy that can give you security on your export debts, you can choose the policy coverage as per your needs.
Read more: What are the advantages of a Commercial Liability Insurance plan?
You can also take the help of SecureNow, a leading corporate insurance advisor, to find the right trade credit insurance policy. Having an expert advisor with you, ensure that you not only choose the best policy but also face no issues at the time of claim settlement.
Just buying the trade credit insurance policy doesn’t guarantee that you will get coverage. Getting paid in the event of the claim depends on your compliance with the policy contract, and here your insurance advisor has an important role in ensuring that you comprehend your responsibilities as a policyholder and takes adequate steps to get your claim settled. A reputable broker will always work towards the best interest of its client and use its expertise and broad market knowledge to achieve the best result.
For many companies, trade receivables may be their biggest economic asset. In a situation where they are unable to collect on these receivables, their income may hamper which would have an impact on their business growth as well. Therefore, for the sake of your business, go with the comprehensive trade credit insurance to manage both commercial and political risks of trade and keep your business afloat.