Trade Credit Insurance
Credit insurance protects the insured from commercial nonpayment event due to insolvency and / or protracted default (slow-pay).
Benefits of Trade Credit Insurance:
Cash flow protection – Buyer nonpayment, due to insolvency or slow pay, can have a significant negative impact on a company’s cash flow. Trade credit insurance allows a company to mitigate the financial impact of buyer nonpayment by transferring credit risk to a well-capitalized insurance company.
Increased competitiveness – Secured or restrictive terms of sale can be a competitive disadvantage in trading relationships. Internationally, the working capital requirements of a commercial letter of credit can limit or preclude sales opportunity. Trade credit insurance allows a company to offer open account terms to international buyers, while reducing credit risk, which provides a distinct advantage when competing globally. Domestically, trade credit insurance allows companies to offer longer or extended terms to buyers.
Sales Growth – Often, buyers want to trade beyond pre-established credit limits. Trade credit insurance allows companies to expand sales without incremental credit risk by adding coverage to existing credit lines.
Monetize accounts receivable / increase working capital – Accounts receivable represent the primary source of repayment for a working capital credit facility. Trade credit insurance enhances the receivable being financed thereby allowing a company to obtain expanded credit facilities, better advance rates and improved terms through the reduction/elimination of ineligibles (concentrations, cross aged, foreign a/r).