What is credit insurance?
Credit insurance protects businesses from the risk of non-payment of invoices. This means invoices are covered. So if a client can’t pay, a business still gets its money.
Credit Insurance is a significant tool in the hands of a business entity offering peace of mind in the event of defaults in payment, but more significantly your Trade Credit Partner will equip your business in making the correct decisions when offering any form of a credit to a client. This gives any business the ability to trade safely while keeping an eye on the opportunity.
Trade Credit Partners work in close partnerships with a business, providing up-to-date insights on markets and sectors, to support businesses’ strategic decisions on trade and business opportunities.
Doing business with Credit Insurance – What does your Trade Credit Partner offer:
- Trade Credit Partners with years of experience can support businesses in averting late payments or even non-payments and insolvency giving businesses support and peace of mind.
- Trade Credit Partners in addition to the insurance, offer protection, with expertise that offers a layer of security when trading domestically and internationally. They further offer information and market intelligence that help detect potential insolvencies before they are filed.
- Trade Credit Partners enable their customers by making available their business intelligence to help explore new clients and markets with confidence so that businesses can grow safely. In addition, with business information, businesses can offer competitive credit to clients.
The Process of Credit Insurance
- A business receives an order from a client:
A business Credit Partner will check the creditworthiness of a business prospect and let the business know if they will take on the risk and if so what percentage of the risk they are happy to be exposed too.
- A business ships the goods and an invoice is sent
In the event of non-payment, a business Credit Partner will handle the debt collection for and on behalf of the business whether it be within the businesses local market or even across boarders.
- No payment from a client
When the debt collection procedure has not been successful or a client has become insolvent, a business’ Trade Credit Partner will pay the claim to restore the business’ cash flow.
With Credit Insurance invoices are covered so that a business can “ship” goods safely.
There are an increasing number of external factors that can cause business instability:
1. Economic risk
Credit Insurance protects a business from unpaid invoices due to a client’s insolvency, refusal, or inability to pay under the terms of a contract. Other causes of loss may include exchange rate fluctuations or unstable commodity prices.
2. Complex risk
When the circumstance of an extraordinary case requires high-level expertise, special attention, and tailor-made solutions, your Trade Credit Partner will be a business’ greatest asset. Trade Credit partners offer unparalleled SRM (Special Risk Management) departments with a team of international experts in the field of insurance, legal affairs, claims and recoveries. Trade Credit Partners will support a business with collecting outstanding claims as soon as a client appears to be in a situation that is starting to worsen.
3. Sudden default… Never think “too big to fail”
Over the last couple of years, Trade Credit Partners have seen an increase in unexpected high profile insolvencies across the world that, due to their size, speed and circumstances, have surprised many. These are defined as ‘sudden defaults’. By their very nature, they are improbable, unpredictable, and unimaginable. The unexpected can happen, which is why credit insurance is designed to protect a businesses receivables from unforeseen customer default.
4. Political and other non-economic risks
In addition to financial and economic exposure, political risks can also have an impact on businesses. Trade wars, for example, government sanctions and an unstable political environment can all impact cash flow. In addition, fraud, natural disasters, increased bureaucracy, cyber-attacks and the growing digital infrastructure such as online trade, make some bankruptcies difficult to foresee. Under the terms of your Credit Insurance, a business can cover these risks.
Fraud continues to be on the increase. Short-term fraud (the main type we see on a regular basis) is where a business is set up with the sole intention of defrauding suppliers in a short period. This is usually characterised by several small value orders placed in a variety of conflicting trade sectors with goods being sold on quickly and cheap. Dependent on the terms, this type of fraud can be covered via a Credit Insurance policy.
Get in touch with a reputable, qualified broker such as Beneple who will be able to provide you with a list of options, detailed steps and guide you through the process.