Key Reasons for taking up Trade Credit Insurance
- It serves as your credit control tool
- It enables you to expand your business
- It protects your balance sheet against events beyond your control
- It provides your bankers with confident to extend higher credit facilities
In the face of challenging business environment where profit margin and banking facilities are squeezed, companies have to contend with bad debts that may result in losses to the bottom line.
By taking up trade credit insurance, you can protect your company’s profitability, as well as your balance sheet, against both credit and political (when you sell to overseas customers) risks beyond your control.
In addition to the peace of mind, you can use trade credit insurance as a marketing tool to extend credit to new customers coupled with access to more banking facilities at competitive interest rates.
How does Trade Credit Insurance Work?
Trade credit insurance helps to protect you against payment default arising from failure of your customer to pay you under agreed terms and conditions. The non-payment could be attributed to protracted delay of either commercial or political nature or insolvency risk when you extend credit to your customers on unsecured payment terms.
Your customers are individually credit assessed by the insurer and a credit limit is set on each customer after which you can trade with them and will be able to claim should something goes wrong later. Credit limit may be revised upward or downward as new information becomes available to the insurer who has extensive global presence to gather information on your customers.
There are many options available for you and you can customise a trade credit insurance policy that suits your company under the following categories:
- Whole turnover cover
- Top or selected buyers cover
- Selected market cover
- Selected product cover
During the lifetime of the policy, the insurer keeps track and will inform you of any changes to the financial health of your customers that may impact their ability to pay your company for the goods or services delivered.
Should your customer fail to pay you, you are insured up to 90% of the credit limit set and you may file a claim accordingly.
If your customer is insolvent, you will receive payment from the insurer within 30 days upon their receipt of written evidence of the insolvency.
For other reasons of non-payment of debt, the claim payment is made within 6 months from your debt due date. Premium rate could be as low as 0.2% on your invoice amount.
Trade credit insurance is available to companies of any size, including lenders.