CREDIT INSURANCE, RIGHT FOR YOU?
Our friends at Allianz Trade have written this great guide on Credit Insurance for you to enjoy.
Over the years, we’ve seen different reasons why businesses buy and keep trade credit insurance. So we thought it might be a good time to show you some cases where Credit Insurance has helped businesses just like yours.
Case 1:
They’ve been “burnt” once by a customer failing to pay them on time. It’s not an experience they would care to repeat.
Why might your customer fail to pay you on time?
- Process: you’ve sent the invoice to your usual contact. They share it with their accounts payable team. In some companies (especially the larger ones), 2 or 3 people will need to confirm the invoice before it’s paid out. This whole process could end up taking quite a bit of time.
- Cash: they’re running out of cash and are prioritising their other suppliers.
- Insolvency: your customer is on their way to bankruptcy
How does credit insurance help?
We pay when your customers don’t. Whether they’re paying late or going insolvent, we can step in. We provide an early warning system to let you know which customers are most financially sound, so you can choose who to work with or who to offer credit to.
Case 2:
A signification order. Small businesses will buy credit insurance to secure an order that is larger than usual.
Why should you consider this?
Imagine this scenario:
You’re ecstatic. One of your customers has decided to double their order this month. This means you need to buy more materials, hire staff, work overtime to fulfil this order.
You know your customer and have been trading with them for a while. They’ve paid you consistently, up until now. But, this is a significant order, and the fact that you need to spend more is putting a strain on your cash flow. You’re worried that if the contract doesn’t go through, you’ll be left with additional material or staff you can’t use. What if your customer’s customers don’t pay them on time?
How does credit insurance help?
We provide peace of mind. Our credit analysts monitor businesses’ financial strength. They’ll be able to tell you if the level of exposure (this extra-large contract) is something your customer can pay for. They give you the confidence to take bold decisions and accept these larger contracts. If their risk assessment is not so positive, you’ll know you need to be more careful: ask for up-front payment, lower the amount… If your customer fails to pay you, then we will step in and indemnify covered debts.
Case 3:
Small businesses starting to trade with a new partner, especially when trading abroad.
Why should you be wary?
You’ve finally found a new customer. Congratulations. You’ve been meaning to export to Italy for ages. You’ve checked they’re a genuine company, after all, you haven’t met them face-to-face. You’ve just sent out your merchandise and invoiced them. A few days later, you start to worry. What if they don’t pay? You know your usual customers well, and you can tell when someone’s going to be late. Even when they’re late, you know they’ll pay. You’ve built this level of trust over time. However, this customer is new, and you haven’t built that relationship yet.
How does credit insurance help?
We can help reassure you that the companies you are trading with are strong enough to pay you. If they do fail, we will pay out insured debts. So you can rest assured that you will get paid.
When we ask our customers why they bought trade credit insurance, they state:
- 38% to grow their business
- 27% to protect against insolvency
- 13% either to secure funding or for company insight and information
- 9% to secure export business
- In short, trade credit insurance helps small business owners:
- Trade with confidence
- Take bold decisions
- And, sleep better at night.