Even if you have strict credit management and a lot of working capital, bad debts are not impossible to avoid. Your biggest asset as a business owner involved in the trading of goods is your debtor’s leader. Trade credit insurance is the best way to get the money back into circulation if your customers fail to pay on time or become insolvent.
Niche Trade Credit offers a complete credit solution that can help protect your business against bad debts. Their sector expertise is over three decades and they can create a tailored plan to protect your business from all risks. This will be based on your annual turnover as well as the trade market that you deal with. Get a free business risk assessment to determine if your company is at high risk for political trading.
Risks that could interrupt your cash flow when trading
Political risks
Sometimes, we trade with government buyers or buyers from countries with high levels of political instability.
A huge loss of money can be caused by political changes, riots or change in licenses.
Commercial risks:
This is mainly due to your customer’s payment capacity.
Insolvency can put a serious threat to the company’s financial health. Late payments beyond the credit term could affect immediate cash flow.
Your risk of credit can vary depending on the country that you trade with. You can have your policy terms formulated keeping this in mind. If the threat of terrorism is high, you can add special insurance coverage.
The advantages of using trade credit insurance to protect you
Bad debt reserves cannot be used to cover cash losses due to debtors failing to purchase.
This causes an imbalance in the current assets ratio, for which credit insurance protection is required.
Credit insurance restores cash flow to the point it should be, i.e. in running your business without interruptions.
You can reduce the risk of running out of working capital and expand your customer base. This will allow you to improve your relationships with your existing customers.
Credit insurance agents have access to a larger database that can help you manage your trading risks with one customer, so you can safely expand your markets.
If you need financing, credit insurance can be used as collateral by banks.
You cannot have the financial knowledge of companies that provide financial solutions if you’re new to business. Their expertise can be trusted before you venture into new markets. You can also protect your business by offering a coverage for unpaid invoices.
