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Trade Credit Insurance As Collateral

Trade credit insurance can be incredibly important for businesses wanting to protect their balance sheet and accounts receivable when trading goods and services on credit terms. This insurance protects a business if their customer cannot pay their debt in events including insolvency, non-payment, protracted default and political risks. This type of insurance policy essentially repays a credit amount (either partially or in full) to a business when a customer cannot pay their invoice.

Trade credit insurance may also be viewed and used as collateral by various lending institutions. The ability to use your trade credit insurance as collateral will depend on the specific lending institution and the type of insurance policy you have. Using your trade credit insurance as collateral can also be used to acquire additional working capital. As a result, trade credit insurance may also be used as a trade finance tool. For further information, contact your lending institution or insurer directly.

Who Should Get Trade Credit Insurance?

Trade credit insurance can be a beneficial risk management strategy to protect your business from the costs of a protracted default and strengthen your credit management. This form of insurance has many benefits, however it is not suitable for everyone. Learn more about this risk management tool now, and see why trade credit insurance may be the best way to protect yourself from bad debts.

Regular Trading With High Credit Risk Customers

If your business regularly sells goods and services on credit to customers who have a high credit risk, you will definitely benefit from trade credit insurance. Trading with customers with a high risk of default is not necessarily a bad thing. High risk in the trade world often means high reward. This is usually due to the fact that many firms refuse to sell goods or services to those with poor credit. Rather than setting credit limits, use trade credit insurance to ensure your business and it’s credit portfolio will be protected from protracted default.

Selling Goods Or Services On Credit

If your business sells on credit payment terms, you know that there is always the risk that your customers may not pay in time, or at all. Extending credit to businesses can be extremely beneficial as it makes it easier for them to purchase from you, and can increase your customer base. Trade credit insurance is a great way to counteract and balance the risk that your customers will be unable to pay on the agreed terms. If a customer is unable to pay or defaults on their purchase, your insurance policy will compensate you for the loss.

Trading In Developing Countries With Political Risks

Working and trading with developing countries can be extremely lucrative, however with such reward comes high risk. Central banking issues, political turmoil, upheaval and the sudden folding of private companies are common issues in developing countries. Using trade credit insurance can protect your business from these risks and allow you to continue to trade in these profitable markets.

Preserving Working Capital & Cash Flow

If you are running a small or medium business, the amount of working capital and cash flow you have will undoubtedly be less than that of a larger company. As a result, any interruption to your business can be detrimental. Trade credit insurance can protect your company from issues such as a major client entering bankruptcy or defaulting on a debt. Your insurer will help cover the cost of the unpaid debt, allowing your working capital and cash flow to be protected and preserved. As mentioned above, you may also be able to use your trade credit insurance as collateral to acquire additional working capital.

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

If your business falls into any of the above categories, trade credit insurance will be extremely beneficial regardless of what other credit control measures you may have in place. It is extremely beneficial to the long term success of your business and can prevent bankruptcy, help companies manage credit and even present opportunities for business expansion in the global market. Trade credit insurance also allows you to reduce your business’ bad debt reserve and manage write-offs with more certainty.

Niche Trade Credit offers a wide range of credit insurance services including export credit insurance and political risk insurance.

For more information on trade credit insurance, speak to an insurance expert at Niche Trade Credit today on 02 9416 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 Experts Think

What Is Happening To The Credit Insurance Market In 2020

Credit insurance is a form of risk management where a business can transfer their financial risk to an insurer. With this insurance coverage, businesses are able to protect themselves against the event of a client or customer being unable to pay their debts. This financial protection is ever important in the world of trade where uncertainty and risk is nothing new. The introduction of the new decade has unfortunately, not gone off without a hitch. From the devastating Australian bushfires, to the withdrawal of the United Kingdom from the European Union and the global impacts of the coronavirus outbreak; 2020 has seen a time of incredible social, political, and economic change.

Such uncertainty, especially within the business and trade world, boosts the demand for credit insurance as businesses realise the importance of protecting themselves from the unknown. This need for financial protection due to current events has impacted businesses both within Australia and overseas.

Let’s take a dive into what is happening to the domestic and international credit insurance markets in 2020:

Domestic

There is no denying, Australia has had a tough start to the new decade. From devastating bushfires, mass flooding and now the outbreak of the coronavirus, there has been no shortage of life-altering events. While all these events have impacted countless individuals, businesses are also dealing with the fall-out. Business failures are on the rise and recent studies have shown that Australian businesses are taking a full month longer than average to pay their bills. The reasons for this delay could be due to any of the previously mentioned events, or simply just bad management of cash flow. One thing we do know for certain is that the demand for credit insurance in Australia is on the rise.

Australian businesses are not only affected by events happening down under, they are also subject to the effects of the global economy thanks to international trading including imports and exports. The need for credit insurance when dealing with international businesses has always been important, especially when dealing with countries facing different economic, social and political risks.

The increased economic risks in 2020 have led to many Australians choosing to take advantage of the various financial services available to them and invest in credit insurance.

International

There are countless events happening worldwide which are impacting the global credit insurance market in 2020. Despite some of these events occuring in specific geographical locations, the repercussions affect many other countries. Many of the below events have also impacted the Australian economy and credit insurance market.

Coronavirus

The coronavirus pandemic and the attempts to slow the spread of the virus have been disrupting economic activity globally. Many of the world’s largest economies are presented with risks to their global trade and business operations. As a result of this, the demand of the credit insurance markets has increased rapidly. The global travel restrictions in place have caused disruptions, delays and even bans on production and is resulting in reduced profit margins for retailers globally. The unforeseen outbreak and impacts of the coronavirus have caused many businesses to close and as a result, have left many debts unpaid due to corporate insolvencies. This has caused many businesses to seek out a trade credit insurer to protect their cash flow during these uncertain times.

Due to the global spread of the coronavirus, almost every country and industry in the world has been affected. This global pandemic has highlighted the importance of credit insurance for many businesses, especially those trading internationally.

Trade Wars Between China And America

This feud between the world’s 2 largest economies appears to only be the start of a prolonged trade war. US President Donald Trump has long accused China of unfair trading practises and expressed unwillingness to bend trade rules to China. While these trade wars trigger fears for businesses globally, the trade credit market is set to increase as demand grows.

If the governments implement higher tariffs, it may lead to an increased production cost and ultimately put retailers in a position where they either shrink profit margins or raise prices on consumers. If these added pressures are enough to drive a business to closure, suppliers will be able to cash in on their credit insurance and get reimbursed for any defaulted payments.

A high amount of companies rely on products from tariff-affected countries like China, meaning that any restriction on trade may result in loss of much needed products, services and profit.

Brexit

The exit of the United Kingdom from the European Union has many effects on global trade, especially if a no-deal Brexit is decided on. With country leaders still in discussion surrounding the specific terms of Brexit, the 11 month transition period proves a difficult waiting period for many businesses affected.

If a no-deal Brexit is agreed on, the UK would leave the EU without any trade or law agreements. The implications of this would be huge, not only for the countries directly involved but globally through international trade. The fears of a no-deal Brexit have already boosted the demand in the credit insurance industry. This demand is expected to grow up until a decision has been made regarding new trade agreements. If a no-deal Brexit has been agreed upon, credit insurance will be more important than ever for companies trading internationally.

Trusted Australian Credit Insurance Brokers

With the unique combination of global events already taking place in 2020, the credit insurance market appears to be steady for the long term future. Many businesses trading internationally are choosing not to make any investment decisions without the approval and protection from an insurance broker. As the year unfolds further, business insurers are preparing to cope with the increased demand.

Niche Trade Credit offers a range of different credit insurance options to suit your business’s individual needs. From standard credit insurance services, to export and political risk insurance and other key services, Niche Trade Credit is here to protect your business against financial risk.

Contact our experts to see how you can protect your business and its cashflow today!

*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

How The Coronavirus Is Affecting Business And Trade

Claiming more than just lives, the coronavirus outbreak has seen thousands of businesses collapse and international trade come to a grinding halt as the global economy crumbles under the weight of the virus. COVID-19, which originated in China, has caused a worldwide financial crisis with disruptions to global supply chains and global trade. Travel restrictions have also been implemented worldwide in an attempt to slow the spread of the virus. The virus itself and the various government measures implemented to deal with it have had major flow on effects impacting business and trade globally.

Unfortunately, experts are predicting that the worst is yet to come. With the foreseeable future looking extremely dire, global businesses are preparing themselves for one of the worst financial situations the world has seen in decades.

Let’s take a dive into exactly how the coronavirus is affecting business and trade:

Stock Markets Plummet

Since the outbreak of coronavirus in December 2019, global shares have taken a huge hit with many reaching their lowest point in decades. Dow Jones Industrial Average is among many companies which have seen a rapid decline in shares since the outbreak, experiencing their largest one-day-decline since 1987. Unfortunately, this pattern of decline does not appear to be ending any time soon and it seems almost every industry is suffering.

Central banks globally have responded to this decline and have begun offering reduced interest rates to make it cheaper for businesses and individuals to borrow money and continue to stimulate the economy. This action aims to encourage economic activity to increase the GDP growth rate and reduce the financial impacts of the virus.

Global Travel Restrictions

In an attempt to slow and stop the spread of the coronavirus, many countries have temporarily shut their borders and implemented travel bans including the limitation of certain imports and exports. These bans alone have severely impacted business and trade for over 100 countries worldwide.

China is the world’s largest exporter of goods and makes up a third of the manufacturing sector globally. They have been hit especially hard due to this with their import and export figures down by 17.2% this January and February alone.

Global travel industries and tourism are practically non-existent at this point due to the travel restrictions currently in place. Flights frequencies have also been cut due to the virus as a result of lack of demand and global travel restrictions.

While these travel restrictions have resulted in the collapse of many businesses, it is important to acknowledge the positive impacts it has had on the environment. Air pollution across Asia and Europe has significantly decreased following the strict travel bans in place after the outbreak of the virus.

Government Stimulus Packages

There is no denying, the economic impact caused by the outbreak of the coronavirus is enormous. The Australian government alone has allocated a whopping $500 billion to stimulus packages designed to protect and help Australian businesses and individuals cope with the devastating financial impacts of the virus. In addition to the stimulus packages created, the Australian government has also introduced a range of temporary tax cuts and increased thresholds. These additional measures have been put in place to temporarily stall and slow the national economic decline.

The virus has also caused global lockdowns in an attempt to protect public health. In Australia, the lockdowns have seen the temporary forced closure of gyms, pubs, clubs, places of worship and other non-essential services. While these measures appear to be working to flatten the curve of the virus, it has meant many businesses have had no choice but to let go of employees and close up shop. Many businesses that have been able to survive thus far are operating on a skeleton team, reducing costs as much as possible to keep their business afloat.

Unemployment Rates Skyrocket

The downfall of businesses globally have resulted in millions of individuals being let go or forced to take unpaid leave. Australian Centrelink has been overloaded with individuals seeking financial assistance after being left without reliable income. Websites crashed, phone lines jammed and many hour-long queues formed outside Centrelink centres nationwide as Australians tried to receive financial aid.

The United States has seen record high numbers of jobless claims following the outbreak of the virus. Over 6.6 million people filed for unemployment benefits in the week ending on 28 March alone. This number is nearly double the figure from the prior week.

How To Protect Your Business Against The Coronavirus

While no one could have predicted the outbreak and devastating impacts of the coronavirus, it is possible to protect your business from the unknown. Trade credit insurance protects your business and accounts receivable by reducing your credit risk. Niche Trade Credit allows you to safeguard your cash flow even if a client fails to pay on the specified terms.

Credit insurance is extremely valuable when trading goods and services to international clients who may be experiencing different political events, insolvency and other serious issues. This insurance protects your business from the variables that may lead to a client being unable to pay.

The impact of the virus has been a wakeup call to many businesses highlighting that everything can change within a short span of time. It has never been more important to ensure your business and it’s cash flow are protected.

Niche Trade Credit also offers export and political risk insurance to protect your business from various international trading risks. This insurance is critical for any business that exports products or services internationally. Different countries are subject to different types of risks including war, government interference and restrictions on conversions and local currency earnings. The benefits of export and political risk insurance include a guarantee that your cash flow will not be interrupted by political events and the peace of mind knowing your business is able to expand into still-developing nations without the excess financial risk.

Ensure your business is protected against the unknown and reduce your financial risk today! Contact Niche Trade Credit on 02 9416 0670 to learn how credit insurance can help protect your business.

*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.