Why would businesses need trade credit insurance?

The main reason a business would take out trade credit insurance is to reduce financial implications if a customer fails to pay. Without trade credit insurance in place, many more companies would suffer large financial losses, redundancies and put the business’ existence at risk. 

However, trade credit insurance does not just protect businesses against any losses as a result of a customer being unable to pay their debts. Trade credit insurance also:

  • Helps businesses sell to new customers that may otherwise have been deemed too risky, knowing they are insured should the customer not pay their debts.
  • Provides additional support and knowledge to help the business avoid losses in the first place and help them grow safely.
  • Provides comfort to banks that the insured has a more secure financial position than otherwise may have been the case, which may in turn enable businesses to access additional bank finance.
  • Helps secure export business, giving confidence to explore new markets and being able to offer more competitive terms.
  • Helps free up capital for the business to use elsewhere, through a reduction in their bad debt reserve (an amount businesses expect not receive because some customers fail to pay).