What Experts Think

Do I need Trade Credit Insurance?

In recent surveys, cash flow problems are some of the most frequently cited reasons why businesses fail to increase their revenue. On top of that, Australian companies are some of the slowest at paying their invoices. For small, medium, and large businesses alike, risking the health of your cash flow isn’t worth it. Increasing volatility in domestic and also international trade means that it’s now more critical than ever to ensure that your business’s revenue and access to capital are appropriately insured and protected against political risks.

At Niche Trade Credit, we’ve been assisting companies of all sizes and across many different industries protect themselves with trade credit insurance. But how do you know if you need trade credit insurance coverage? We’ll explore how an insurance policy can protect you and also expand your market reach.

How does trade credit insurance work?

If you sell goods and services on credit terms with your customers, if they fail to pay, your business is in trouble. No matter how well you manage your business, you don’t have control over what happens on your customer’s end of the transaction. They can experience their own cash flow issues, and political instability and currency manipulations can interfere with your customers’ ability to pay and harm your bottom line. Insurance solutions like trade credit policies protect your business from these types of unpredictable financial mishaps.

A trade credit insurance policy works by protecting your accounts receivable. A policy can cover either part or all of the account, depending on your needs and business goals. A trade credit insurance policy will protect you against bankruptcy and unpaid invoices.

About 20% of a company’s buyers account for up to 80% of sales. Trade credit insurance protects your business from losses that could result from the insolvency of your key accounts.

Is risk management the only thing that a trade credit insurance policy can do for me?

Trade credit insurance policy can do more for your business than protect it from catastrophic losses. Trade credit insurance can act as a financial tool and a sales product.

  • Lending institutions understand that the insolvency of a company’s key customers would jeopardise the repayment of a loan. Businesses who are covered under a trade insurance policy gives them access to favourable lending terms.
  • Credit insurance can also help your company sell more goods and services on credit terms. At the same time, the policy can help you reduce your risk of exposure to nonpayment. Trade credit insurance can also help you take advantage of ideal or cyclic selling periods and expand your reach into new product lines or markets.

Should you continue to self-insure?

Self-insuring your company against unpaid invoices may have worked in the past. But in today’s competitive global economy, self-insuring your businesses is too much of a risk. And recent a cash flow statistics and studies show that self-insuring against catastrophic losses isn’t feasible anymore.

Also, credit insurance gives you better access to credit and gives your company the ability to expand your market reach. You can also deduct your trade credit insurance premiums from your taxes. Self-insuring does not give you these added benefits.

Here at Niche Trade Credit, we’ve been helping our valued clients find trade credit insurance solutions that work for their specific company and their goals. When you contact us, we will explore your options and find a policy for you that will be tailored to your particular needs. Don’t leave your company exposed to credit risks and insolvency. Reach out to Niche Trade Credit today to explore our coverage options from one of our experienced trade credit insurance brokers.

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