Trade Credit Insurance

Balance the Cost of Doing Business with the Risk of Doing Business.

Financial executives must continuously balance the cost of doing business with the risk of doing business. Each time a dollar of revenue is produced, all costs of generating that dollar have been thoroughly analyzed in an effort to maximize the profit margin, including costs associated with accounts receivable management. However, the hundreds of billions of dollars in losses associated with bad debt charge-offs in recent years have brought new attention to managing trade receivables from a risk perspective...

Increase Sales without Increasing Exposure

The protection it provides allows a company to increase sales with existing customers without increasing its exposure. Insured companies can sell on open account terms, where they may be without restricted today, or only sell on a secured basis. For exporters, this can provide a major competitive advantage.

While protecting capital, cash flow, and earnings are what most companies recognize as the main reasons to purchase trade credit insurance, the most common reason to invest in insuring their accounts receivable is because it helps them increase their sales and profits.

The ultimate goal is not simply to indemnify losses incurred from a trade debt default, but to help the business avoid catastrophic losses and grow the business profitably. The key is having the right information to make informed credit decisions and therefore avoid or minimize losses.

A trade credit insurance policy does not replace a company’s credit practices, but rather augments and enhances the job of a credit professional. The best credit insurers will invest heavily in the development of proprietary credit and financial information. Having access to this information allows companies to make more informed decisions about how much credit to extend to which buyers. More importantly, it enables companies to avoid losses through the close monitoring of their customers.