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Understanding Political Risk Insurance Coverage Definitions

When it comes to insurance, one of the most important lines an insurer can offer for any company working in a developing country is political risk insurance.

Political risk insurance can be offered by financial institutions, a private insurance company, or a public agency. And while each policy will vary, they are all intended to do the same thing – safeguard companies who are undertaking long term projects and customers in emerging markets.

Unlike in stable, developed markets, there is always a risk of business delays and losses due to political instability and upheaval in emerging markets, and that’s what’s covered by political risk insurance coverage. Learn more about the most common political, economic, and financial issues covered by this type of insurance now.

  1. Contract Breach Or Contract Frustration

If a foreign government breaches its contract for any unfounded reason, a political risk insurance policy will cover the associated costs and losses, making one of these policies very important for risk management.

Contract frustration is also covered by political risk insurance. Frustration occurs when, due to unforeseen circumstances like a political revolution, one party in a contract is unable to uphold its end of the deal.

  1. Political Violence And Upheaval

Every form of political violence is covered by a political risk insurance policy, including civil war and wars abroad, armed rebellion or insurrection, civil disobedience that causes major upheaval, and other government action or action by citizens that could damage your profits and cause your project to fail, resulting in financial loss from forced abandonment.

  1. Expropriation Or Nationalization Of Property Or Assets

This is of particular importance to infrastructure developers. If their property is confiscated or nationalized by a government, they will be compensated for the financial loss of their private property.

An example of this would be when Venezuela, under Hugo Chavez, expropriated and nationalized 11 oil rigs from a US-based drilling company, Helmerich & Payne. Thanks to a political risk insurance company, the owners of these rigs were able to recover $43 million.

  1. Foreign Currency Inconvertibility, Inability To Repatriate Funds

Even if a business transaction in a developing market is successful, there is the risk that the funds may not be able to be converted back into the proper currency, or that the government or a bank may block the repatriation of funds. In this case, political risk insurance coverage will compensate for the loss.

  1. Business Interruption

Business interruption is often covered in tandem with other protected events. For example, a company that has its business interrupted by several weeks of rioting and protests may be covered for business interruption due to political violence.

  1. Government Default On Payments

In the event that a government simply refuses to pay you for the services or goods which you have rendered to them, your political risk coverage will cover this loss.

  1. Import/Export License Suspension Or Revocation

If your license is suspended due to political reasons, or revoked, political risk coverage will typically compensate you for the losses related to this loss. Note that this may not be true if you were conducting illegal activities, or if you were found to violate import/export regulations.

Coverage Varies Based On Your Policy – So Do Your Research!

Depending on the policy you purchase, your coverage may vary quite a bit. Every insurer offers a different type of political risk insurance, and the cost will also vary, based on the assets you need to protect, and a number of other factors.

To make sure that you have the political risk insurance that you need to protect your company, you should get help choosing a policy. At Niche Trade Credit, we have more than a decade of experience working with top insurers as an insurance broker. We can help you pick out the right political risk insurance product, and get a great rate. Contact us now to learn more.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Does a Trade Credit Insurance Policy Cover?

A study published in 2016 from MarketWatch found that Australian businesses are the worst at paying their invoices on time. As an Australian business owner, you want to make sure that your company is protected from insolvency and bad debts. In today’s global economy, it’s also crucial that you protect your bottom  line from political risks. Can a trade credit insurance policy help protect your business and increase your growth? At Niche Trade Credit, we’ve been helping Australian businesses find the best credit insurance coverage for their needs. Today, we’ll explore how trade credit insurance policies work.

How does trade credit insurance protect a business?

When a business sells its goods and services on credit, it puts itself at risk of non-payment. If the buyer is unable to pay for the goods and services after they’ve already received them, the business can be seriously harmed. Cash flow, profitability, and balance sheet problems can

hit your business when buyers don’t pay. Worst case scenario? The company will fail.

So, what can companies do to protect themselves? They can purchase a trade credit insurance policy to cover their losses in the event of non-payment. Trade credit insurance helps businesses maintain a positive, predictable cash-flow so that they can remain competitive in their industry and prevent business failure.

A trade credit insurance policy gives suppliers with the accounts receivable protection they need to protect their business from a buyer default. That includes defaults because of the buyer’s financial instability, or even widespread political instability. Trade credit insurance solutions can protect part or even all of a client’s account receivables. In some cases, policies can also give business owners the ability to set buy credit limits and manage those limits via online systems.

Businesses of all sizes can use trade credit insurance to protect international and domestic trade. Trade credit insurance can also help companies secure financing and working capital from lending institutions, and enable companies to explore new markets and attract new customers with attractive credit terms.

How is the level of coverage determined?

When it comes to trade credit insurance, there is no “one-size-fits-all” policy. Your specific needs and goals will dictate the amount of coverage and the cost of the policy. The size of your credit portfolio, the level of risk associated with your customers, and where your market is located are important insurance factors that will be unique to your business and industry. A trade credit insurance policy is tailored to your particular business. It’s crucial that you reach out to a knowledgeable credit insurance company to discuss your specific needs and your business goals so you can get the best value on a trade credit insurance policy.

What are the significant benefits of a trade credit insurance policy?

Protecting your company from bankruptcy isn’t the only thing that trade credit insurance can do for you.

  • Increase your customer base since new leads will be attracted to your improved credit terms.
  • Expand your market since you’re protected from political calamity.
  • Insured cash flow means you can build stronger relationships with employees and suppliers.
  • Enhanced credit terms can help you retain the customers you already have.
  • Increase your access to favourable credit terms from banks.
  • Give your stakeholders or board increased peace of mind with trade credit insurance protection.
  • Decrease your tax liability by using your credit insurance as a tax-deductible business service.

Are you ready to reap the benefits of trade credit insurance solutions, and rest easy knowing your company is protected against insolvency and failure? Please contact our knowledgeable representatives at Niche TC today. Together, we’ll explore your options for a trade credit insurance policy that will protect your business and accelerate your growth.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Experts Think

What Is Pre Credit Loss In Credit Insurance?

If you are interested in an insurance product like trade credit insurance as a way to simplify risk management and protect your balance sheet from protracted default, you probably have quite a few questions.

For example, what is a pre credit loss? What does it mean – and why do you need a policy that includes pre credit coverage? In this article, we’ll discuss the basics of pre credit loss in credit insurance, and why it’s important for credit management, avoiding bad debt and protecting your cash flow.

Defining Pre Credit Risk

Pre credit risk is, essentially, the risk that your buyer will cancel or will be unable to honor the contract terms before your products are delivered. 

For example, if you create and manufacture a custom product that has a six-month production time, and your buyer goes bankrupt before the products can be delivered, this is a pre credit loss. 

The same is true of products that can no longer be shipped due to political risk, such as civil unrest or banking issues. These are also covered in the terms of pre credit risk insurance. 

Without working with insurance companies for pre credit risk insurance as part of a trade credit insurance policy, you may find yourself in a difficult situation where your buyer cancels the contract, but you are unable to get compensation for your products.

Pre Credit Loss – Losses Caused Before Delivery Of Goods/Completion Of Contract

There will typically be a waiting period of about 30 days before you are compensated. This may vary based on your insurer. Trade credit insurance policies typically will reimburse you for all working costs and losses you sustain as a result of the pre credit loss, including:

  • Production costs
  • Net of profit margin
  • Advance payments which you cannot recoup due to the buyer cancelling the contract

Usually, however, you will not be compensated fully, but with a payment calculated as a percentage of your loss. For example, your trade credit insurance policy may compensate you for 85% of your loss, as outlined in your policy, within your credit limit for the particular buyer.

The Importance Of Pre Credit Insurance Coverage

So, why is pre credit insurance such an important part of trade credit insurance, and a valuable method of credit management? Here are a few reasons it’s such a useful insurance product.

  • Reduces risk of taking on long-term projects – With pre credit insurance coverage, you can take on long-term manufacturing projects without worrying about your buyer defaulting – reducing risk and allowing you to take more complicated projects from your buyers.
  • Protects your cash flow – You won’t have to worry about losing money due to buyers breaking your contract – your cash flow will be protected and you’ll be compensated for your losses.
  • Comprehensive coverage – Pre credit insurance coverage doesn’t just compensate you for your profits, but also for costs incurred when designing, developing, manufacturing and transporting your products – and more. 

Learn More About The Benefits Of Pre Credit Loss From Niche Trade Credit!

At Niche Trade Credit, we specialise in providing our customers with the insurance they need to protect their businesses in Australia. As a leading trade credit insurance broker, we can help you understand everything you need to know about trade / bad debt insurance – and pick the policy that’s right for you. Contact us now to get started, by calling 02 8416 0670.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Factors Affect My Trade Credit Insurance Premium Rate?

If you’re interested in purchasing trade credit insurance for risk management of your balance sheet, and to protect your accounts receivable from bad debt, and you’re wondering how much you can expect to pay, we’re here to help.

Learn more below about what trade credit insurance protects, and how much you can expect to pay for this protection, by understanding what affects your premium rates.

The Country In Which You’re Doing Business

Depending on which country you’re planning on doing business, your premiums may be higher or lower. If you’re exporting to North America to the US or Canada, for example, you’ll pay less than if you were exporting to a developing country in Africa, where the risk of non-payment could be greater.

If you work in developing countries, you may also need political risk insurance. This is a separate policy often added to trade credit insurance, to protect from political risks like violence, breach of contract, asset seizure and forfeiture, and currency problems.

The Creditworthiness Of Your Clients And Customers

If you have good internal credit control systems in place, and typically only allow trade debts for customers who have a history of paying on time, you’ll pay less for your trade credit insurance premium.

In contrast, if you work with companies who have a history of defaulting on their debts, or have poor creditworthiness, you’ll pay more for your monthly premiums. In some cases, you may not be able to insure a debt at all, as it may be too risky, and the insurer may refuse to issue a trade credit insurance policy.

Filing Political Risk Insurance Claims

The more valuable a contract or invoice is, the more it will cost to insure, because the loss for the insurance company will be greater if the company fails to pay.

Percentage Of Compensation

When a transaction falls through, your trade credit insurance company will provide you with a set percentage of its value as compensation. This can be as high as 90-100% of the value of the transaction.

However, if you want a lower premium rate, you could ask to insure only 70-85% of the value of the transaction. This would result in a much lower premium, which can enhance your cash flow – and as long as you are provided with enough compensation to stay in business, you will still be protected.

Get More Details From Niche Trade Credit Now!

This is just a high-level overview of what factors can influence the cost of trade credit insurance services. If you’d like to see an example contract, get a quote for a premium, or just learn more, we recommend you contact Niche Trade Credit right away. We’d be happy to help.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Why Buy Political Risk Insurance?

If you’re considering purchasing political risk insurance from a private insurance company, you’re making a good long term investment in your company. Political risk insurance is a key part of risk management strategies for infrastructure developers and companies who do a lot of business in developing areas of the world.

Purchasing this type of policy from the insurance market allows you to protect yourself from political violence, upheaval, currency issues, and most other political issues that could result in a failure to deliver payment, or even a seizure of your property and assets. Why invest in a policy? For the following three reasons – and many more!

Ensure Stable, Predictable Cash Flow For Your Company

First and foremost, political risk insurance helps protect your company’s revenue, and ensure that you have plenty of reliable, working capital, and uninterrupted cash flow. Even if your company has hundreds of customers across the world, interruption of business is commonplace in emerging markets.

If you were counting on profits from emerging markets to ensure that your business can continue to expand, you may be at risk of losing this money if you do not purchase political risk insurance. However, if you do have this insurance, you can have peace of mind – and know that you will be compensated if something unforeseen results in the loss of your assets.

Avoid A Potentially-Devastating Financial Loss

Political risk insurance is particularly important for smaller companies who work in emerging markets. If you have just a few customers, or several countries in which you sell most of your products or services, political upheaval could mean that your business ends up going bankrupt, or barely has enough money to continue operating.

If the loss of a single customer, or all of the customers in a single country would be financially devastating for your company, purchasing a political risk insurance policy should be one of your top priorities.

It may cost a bit more in the short term, but if something does go seriously wrong and you lose much of your business, you will be compensated – and be able to re-prioritize, and make sure that your company is not destroyed by an unpredictable, devastating political event.

Expand The Reach Of Your Business To Developing Countries

Emerging markets are one of the best places for exporters and infrastructure developers to work. With high populations and growing disposable income even in some of the more underdeveloped areas of the world, there are always business opportunities in these markets for those who are willing to take on a bit more risk.

And political risk insurance is an ideal way to help minimize this risk when expanding to emerging markets, particularly when coupled with a trade credit insurance policy.

Your insurance policy will help protect you from any unforeseen political events, while your trade credit policy will protect you if you if one of your customers goes bankrupt or defaults on their payments to you.

This allows you to build your company more quickly, and expand into emerging markets that your competitors may be avoiding. In turn, this leads to higher profits – and a stronger, more diversified business.

Interested In Political Risk Insurance? Contact Niche Trade Credit Today!

As experienced insurance brokers in Sydney, the team at Niche Trade Credit can help you understand political risk insurance – and find a policy that’s right for your company. If you’re interested in protecting your business and your assets while working in potentially-unstable, developing markets, please contact us right away. We’d be happy to provide you with more details, and assist you in purchasing the appropriate policy for your needs.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Does Your Business Require Trade Credit Insurance?

Trade credit insurance protects you if your clients default and fail to pay for your goods or services, and it’s a great way to protect yourself from the costs of protracted default. As a credit management tool, it’s invaluable – and it can give you peace of mind at your small business.

But is it right for your business? Learn more about this risk management tool, and see why trade credit insurance may be the best way to protect yourself from bad debts.

You Sell Most Or All Of Your Goods Or Services On Credit

Any business that sells goods on credit payment terms like Net 30 or Net 60 days knows that they are taking a risk that their customers may not pay in time. However, extending credit to businesses makes it easier for them to buy your goods and can increase your customer base.

Trade credit insurance is a great way to balance the benefits of selling on credit with the risk that your customers fail to pay according to your terms. If a customer doesn’t pay and defaults on their purchase, your insurance broker will compensate you for the loss. 

You’ll Face Difficulties With Working Capital If Customers Fail To Pay

If you work mainly with just a few large companies and provide them with large credit limits, for example, and one fails to pay or defaults, you could face a serious cash crunch that may result in cash flow and working capital difficulties – potentially leading to layoffs, business slowdowns, and other issues.

You Want A Safety Net To Protect Your Accounts Receivable

Your credit portfolio is a great asset – and if you are worried that it’s not protected from customers who may fail to pay, an additional layer of protection from a trade credit insurance policy is a fantastic choice. 

You’ve Had Problems With Corporate Debt Collection Services In The Past

Debt collection is not easy in a corporate setting. If a company goes bankrupt or simply disappears, you may not be able to recover the cash you need – even if you hire an experienced corporate debt collection service.

But with trade credit insurance, your insurance broker is responsible for going after bad debts. You don’t have to worry about it – you’ll be compensated for your loss, and you can continue operating your business normally.

Your Business Works In Countries With Political Risks

Political risk coverage is a common add-on to trade credit insurance policies. It protects your company in the event of civil unrest, civil war, banking and monetary issues, regulatory changes and other political risks that may cause your business partners to default on their payments. 

Learn More About Trade Credit Insurance From Niche Trade Credit Now!

If you run a small business and you’re interested in learning more about how trade credit insurance can protect your company, contact Niche Trade Credit right away. As a leading trade credit insurance broker in Australia, we’re always here to help. 

We have decades of experience working with companies of all sizes in Australia – and we can help you find the trade credit insurance policy that’s right for protecting your business. So don’t wait. Get in touch today on 02 8416 0670.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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Our Tips For Filing Political Risk Insurance Claims

Political risk insurance is a tool that’s extremely useful for any company doing business in an emerging market, where there is a risk of political violence, or other types of upheaval that could result in a loss of property, investment, or assets.

Many different financial institutions and insurance companies offer political risk protection. And, whether you already have a policy or you’re thinking about investing in this product, you may be wondering what it’s like to file a claim. In this quick post, we’ll discuss three of the top tips we have for filling your claim, so you’ll know what to expect.

Know Your Policy (Before You Have To Use It)

The exact coverage that you receive will depend on the policy you have purchased, and the phrasing and language in which it’s written. We highly advise that you have a competent professional look over any policy that you purchase. What coverage will political risk insurance include? Here are a few of the most commonly-covered events:

  • Political violence, such as rioting, insurrection, civil war, terrorism, war, etc.
  • Governmental expropriation and confiscation of private assets
  • Government frustration, rejection, breach, or repudiation of a contract
  • Wrongful calling of letters of credit
  • Business interruption
  • Currency issues, including inconvertibility or inability to repatriate funds to your country

You should have a good understanding of what your policy covers, to ensure you file a claim at the right time.

For example, your policy might cover you if an attack on an oil rig by a militant group results in its loss – but not if political unrest causes a drop in the oil commodity price. It all depends on your policy.

Get In Touch With Your Insurance Company As Soon As You Can

Keep a close eye on the political situations in the countries in which you’re doing business, and contact your insurer as soon as you notice any issues that may result in the need to file a claim. The sooner you file a claim, the sooner you can be compensated.

Be Prepared For A Lengthy Review And Approval Process

Sometimes, your situation will be very clear-cut. If a government seizes your assets and facilities, for example, and this is confirmed, you likely will be compensated quite quickly. But, given the murky nature of political unrest and violence, things are not always so clear. The process of reviewing and approving an insurance claim can take some time. Be patient, work with your insurer, and provide them with everything they need to help speed up the process.

Let Niche Trade Credit Help You Find The Right Policy And Insurer!

As experienced insurance brokers in Sydney, Niche Trade Credit can help Australian businesses get the political risk insurance coverage that they need to protect themselves from political violence, seizure of assets, and other such risks.

If you’re interested and would like to learn more, please contact us right away. We can answer any questions you might have, and help you understand more about this unique type of risk protection insurance.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Does Export Insurance Cover?

Business owners who work in the import and export trade, or regularly export shipments to international customers may not be fully covered by their current business insurance, should something go wrong with the shipment, and the sale or export of the goods cannot be completed, or the customer fails to pay.

Will traditional business insurance cover this loss? In most cases, no. While you may be protected from loss or damage of your goods, you’ll need a special type of insurance coverage to protect your accounts receivable from non-payment – export insurance, also often known as trade credit insurance.

Wondering what export insurance covers, and if you need it for your company?

Export Insurance Is Not The Same As Marine Insurance Or Cargo Insurance

If you are running an import and export business, and you have cargo insurance or marine insurance, you may be wondering if you really need trade credit insurance – aren’t you covered for most situations that could happen on the ship that’s carrying your goods?

Yes, marine insurance covers the loss and damage of ships and cargo – and more specifically, cargo insurance provides full coverage for any commodity or damage that occurs the items during shipment.

But protecting your goods while they’re in transit to their destination is only part of the puzzle. What happens if your goods are delivered to the destination safely and you’re notified that they’ve been delivered – and your customer doesn’t pay? 30 days go by. 60. 90. 120 – and no notice of payment.

Then, it turns out that political instability or corporate insolvency has affected your customer’s ability to pay. Essentially, you’ve lost the sale – and if you’re lucky, you might get your shipment back, but this is not guaranteed. What recourse do you have to get paid?

If you don’t have export insurance, you don’t really have any options. You have to take the loss. But if you do have this insurance, you can file a claim – and be compensated for the loss, by your insurance provider.

Export Insurance Protects Your Accounts Receivable From Default

You can think of this insurance as a way to insure you from risk when offering trade credit to your buyers. Trade credit is a great way for businesses to sell their products more flexibly – but when you extend a line of credit to any company, you’re taking a risk, particularly if it’s a large line of credit, a newer company, or even an established company in a politically-unstable region.

If you want to protect your accounts receivable, and make sure that your business is not heavily affected by a particular customer defaulting on their debt, you can carry an export insurance policy. Then, if you cannot get payment from a customer – due to financial insolvency, protracted default, or the bankruptcy of their company – your export insurance will cover your loss.

Political risk insurance is another important part of international trade insurance. Often bundled with the export policy, it protects your company if political turmoil, such as social unrest, currency problems, or expropriation result in the loss of a sale.

How much does export credit insurance cost? Insurance cost depends on a variety of factors. Although you can insure a single transaction, you will typically insure a large portfolio of buyers, and the insurance company will pay a set percentage of any invoice or receivable that is unpaid. Your premium rate will reflect the average credit risk of your buyers – and the amount of coverage you request.

In general, it’s a good idea to have this type of  insurance – exporters, in particular, should make sure they’re covered, if they often extend long credit terms to customers, or work with more recently-established companies that could carry the risk of defaulting.

Get Your Policy Today!

At Niche Trade Credit, our company is an ideal choice for export insurance and trade credit insurance. With great service and reliable rates, we’ve helped insure hundreds of Australian companies. If you have more questions or would like to enquire about our rates and services, please feel free to contact us right away.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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How to Protect Your Business from Bad Debts

As a business owner, you know how crucial it is to protect your business from bad debts and ensure positive cash flow. Cash flow issues and the debt that they cause is the number one reason that Australian companies fail. How can you protect your small business from bad debts and unpaid invoices? Here at Niche Trade Credit, we’ve been helping business owners in the Sydney area protect their companies from insolvency and debt collection with insurance solutions. In today’s article, we’ll explore the different ways you can protect your business from an unpaid debt.

  1. Credit Applications

You don’t want to have to deal with chasing after customers over unpaid invoices. The first step to reducing your risk of bad debts and experiencing future cash flow issues is to have every new customer fill out a credit application form. A credit application form should include the following information:

  • Their full business details.
  • Trading name and ABN.
  • How long they have been in business.
  • If they have any credit guarantors.

Consider asking for and contacting bank references, and any details of the new customer’s suppliers. You could also require the customer to sign a director guarantee. Be sure to check if the customer’s business is registered with the Australian Business Register.

  1. Conduct a Thorough Credit Check

If you need to extend credit to a new customer, it’s critical that you conduct a thorough credit check. Many reputable agencies conduct credit assessments. The cost of a credit check will depend on how much information you are looking to gather. You can also find a lot of information about a potential customer and their trustworthiness via online, third-party review sites.

  1. Impose Clear Credit Terms

Most businesses use a standard 30-day term for credit, but you’re free to impose any conditions you like for your business. Make sure that the conditions you impose are clear, in writing, and that all parties involved understand their obligations.

When setting the terms, make sure to include:

  • The credit limit
  • Late-payment interest

Companies usually review the terms as the relationship with the customer evolves. It’s reasonable to give flexibility to older, valued customers as opposed to new customers.

  1. Invoicing

When you invoice customers, make sure that your instructions are clear, and that no room within the invoicing instructions would give customers an opportunity to delay payment. For example, entering the wrong amount for payment, or failing to include important bank details can lead to a delay. An airtight invoice can help you avoid this risk, and always make sure to invoice promptly and send any follow-up reminders if needed.

  1. Debt Collection

Partial payments or even late payments are better than no payment or the added expense and stress of legal action. If a customer is failing to honor an invoice within the terms they’ve agreed to honor, the first step you’ll want to take is to send them a letter of demand. In the letter, offer a payment plan via installments as an option. Getting the customer to agree to an installment plan and honor their commitment is far less stressful than taking legal action.

However, sometimes it’s not possible to get a customer to agree to installments. If this happens, you can hire a debt collection agency or take further legal action. Before you commit to either option, you’ll want to weight the costs of these services vs. the chances of recovering the debt from the customer.

For added peace of mind, you can always purchase a tailored trade credit insurance policy for your business. This insurance will cover part or all of your accounts receivable depending on your needs. In the event of non-payment, your cash flow is protected with this policy. At Niche TC, we’ve been helping business owners protect their cash flow from insolvency through insurance solutions. Please contact us today to speak to one of our brokers about trade credit insurance services.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

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What Is Whole Turnover Trade Credit Insurance? Do I Need It?

If you’ve been looking into protecting your balance sheet with trade credit insurance, you may be wondering what it means to purchase a “whole turnover” policy. What does whole turnover cover? What does it mean? Can it protect my cash flow? In this brief blog, we’ll answer all of those questions, and more! Let’s get started.

Whole Turnover Trade Credit Insurance Covers All Of Your Accounts Receivables

Up to a certain credit limit, whole turnover credit insurance will provide a percentage of coverage for your entire balance sheet.

These discretionary limits and the percent of cover that a trade credit insurance coverage policy offers are set when you purchase your policy.

As a rule, the higher the percentage of accounts receivables, the higher your premium will be. The same is true of each buyer covered – higher credit lines and higher invoices will mean a higher premium.

What this does is protect you from bad debts. Insured turnover means that, if your export trade company is not paid by a particular company, you can still recover funds, up to the limit set by your policy. This preserves your cash flow, and allows you to continue operating, even if a customer defaults.

Do I Need Whole Turnover Trade Credit Insurance?

This really depends on how many clients you have, how reliable they are, and their payment history.

In many cases, it may make more sense to simply cover individual clients or transactions with their own trade credit insurance policy. This is very common, and often done for particularly large sales, or when selling to companies that are new to the industry, or located in unstable nations.

Most often, whole turnover trade credit insurance policies are used for those who engage in wholesale trade or international trade with just a handful of large clients. These policies are the most valuable for companies who would face serious financial difficulties if any of their large clients fail to pay, or fail to pay in a timely manner.

So, if you tend to work with a large volume of companies and have smaller transaction amounts, you may not need whole turnover trade credit insurance. But if you work with just a few large companies, and you would have cash flow difficulties if any of these companies defaulted, you may want to consider whole turnover trade credit insurance.

Learn More From Niche Trade Credit Now!

Niche Trade Credit specialise in trade credit insurance services and whole turnover insurance. We can provide you with a reasonably-priced policy that will protect your company, and give you peace of mind. Contact us now to learn more.

*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.