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.
The following diagram demonstrates the relationship between the terms of sale and he buyers willingness to purchase:
RELATIONSHIP BETWEEN TOS AND SALES
Sales Growth is when buyers want to trade beyond pre-established credit limits, which happens often. Trade credit insurance allows companies to expand sales without incremental credit risk by adding coverage to existing credit lines.
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