Trade Credit Insurance – Any Sale Carries Risk

With every sale, there is a chance the buyer will not pay and non-payment can be damaging, or even catastrophic, to a seller.

One or two bad debts can wipe out profits for the year.

The unexpected can happen.

Want to mitigate this risk?

How do companies manage bad debt risk?

Self-insurance

Companies earmark cash for bad debt reserves.
However, self-insurance fails to protect against very large, unexpected losses and negatively impacts cash flow and the balance sheet.
Companies that tie up capital with self-insurance hamper their ability to invest in growth opportunities and often become very conservative, especially in international markets.
These companies also must take on the total responsibility for evaluating the creditworthiness of customers.

Bank/Invoice Finance provider Bad Debt Protection

There is a significant cost.
When collection of debt is turned over to an aggressive third party, companies risk alienating customers.

Letters of Credit* and Payment in Advance

These normally apply to international sales. Unfortunately…

…they limit the amount buyers can or will buy.
…they are expensive.
…they generally have to be set up on a transaction-by-transaction basis.

Trade Credit Insurance

Though there is a modest cost, trade credit insurance has many advantages

Analysis of the viability and financial stability of a potential customer
Bridge the gap between the sales and credit departments
Assist with streamlining the accounts receivables and collections departments
Cover Losses while selling on Consignment Stock
Cover Losses Due to Political Risk
Covers Losses that occur before goods are invoiced