Most companies insure virtually every aspect of their business. Yet, believe it or not, fewer than l0% of American businesses protect their primary source of income: their outstanding invoices or accounts receivable (A/R) – even though losses from customers failing to pay invoices are more common than those caused by fire or theft and can be equally, if not more, devastating.
The solution: Trade Credit insurance, (also known as Accounts Receivable insurance) which guarantees payment, up to the amount under the policy, of A/R owed by customers whose receivables are past due, are unable to pay or refuse to do so, or who are in default, This coverage is essential if a significant percentage of your sales are credit based and/or you sell regularly to new customers.
- By protecting you against losses from bad debts, it enables you to provide more credit to more customers – which means higher sales.
- A Trade Credit policy protects your company against the financial impact of a customer going bankrupt because the insurance company must pre-approve all orders, carrying Trade Credit coverage provides you with valuable information on the financial stability of your customers. This enables you to offer more aggressive terms and/or solicit larger orders. Trade Credit insurance allows you to increase the size of your working capital. For example, banks might be willing to lend against 90% of your receivables rather than 80%. In today’s restricted financing environment, banks will be more likely to lend to you and to offer better terms.
What’s not to like?
Our insurance professionals would be happy to offer their advice on the Trade Credit policy that’s best for your business. Please feel free to get in touch with us at any time.