Trade credit insurance is a simple and effective way to manage your credit risk

You may have already heard of trade credit insurance but don’t know much about it. Or you may be completely unfamiliar with it and are thinking “that sounds complex and daunting”. The Channel Partnership translates credit insurance into your language and helps explain how, when implemented well, it means better management of your business’ trade credit risk.

In layperson’s terms, trade credit insurance protects businesses like yours against the risk of loss of revenue if:

  • your customer or client owes you money for products or services you have provided, and
  • they cannot pay their debts.

This could happen for many reasons: such as a company defaulting because of poor cash flow, becoming insolvent, or going bankrupt. When you take out a trade credit insurance policy, you can insure your accounts receivable (debtors) against the risk that a customer will be unable to pay.

Trade credit insurance can also be referred to as debtor insurance, debtor protection, bad debt insurance, export credit insurance and accounts receivable insurance. We think that trade credit insurance keeps it simple.

Underlying company insolvencies reached their highest annual level for 6 years primarily driven by creditors’ voluntary liquidations.

Insolvencies chart

Source: The Insolvency Service

Reducing your business’ credit risk

You may be thinking, “oh, that won’t happen to my customers” – but it’s important to remember that with an ever changing economic and political climate, company insolvencies can happen at any time.

Think of it like this: if you bought a house in a flood-risk area, then you’d consider taking out an insurance policy to protect yourself against flood. You may even think it’s a good idea to insure against flooding BEFORE it happens. Then why not do the same for your debtor ledger? There is always an element of risk in offering credit to any customer. It’s wise to be wary, and trade credit insurance provides the perfect financial safety net for your business.

Want to know more?

It all starts with a conversation – whether that’s a phone call, a Skype call or a meeting over a cup of tea. No prizes for guessing that a meeting is our preferred option. It’s the quickest way for you to get the information you need. We’re confident you’ll find it worthwhile – even if our advice is that we may not be the best solution for you.

Can you spare the time for a cuppa?

Of course, there’s no obligation. Please fill in this form or just give us a call on 01275 817320.

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