Who Needs Trade Credit Insurance?

The Top Signs It’s Right For You

Wondering if trade credit insurance is right for your risk management strategy? While it’s a powerful way to protect your accounts receivable and your balance sheet when extending goods and services on credit terms, it may not be right for everyone. 

So, how can you know if it’s a good fit for your company? Who needs trade credit insurance? In this article, Niche Trade Credit will take a look at a few of the top signs that it is right for you. 

1. You Regularly Trade With Customers Who Have A High Credit Risk

If you regularly sell goods and services on credit to customers who have a relatively high risk of default, trade credit insurance is definitely right for your company.

Selling to companies with a higher credit risk is not always a bad thing – in fact, it can be very profitable, because many firms will refuse to sell goods or services on credit to those with poor credit. 

However, there is always the risk of default. But with trade credit insurance, you’re protected from protracted default. It protects your business and your credit portfolio when you can sell to customers with high credit risk. 

2. You’re Engaging In Trade In Developing Countries With Political Risks

This is another sure sign that you need insurance. Working in developing countries can be lucrative, but also risky. Political turmoil and upheaval, central banking issues, and sudden folding of private companies are all common issues. 

But with trade credit insurance – and its close relative, political risk insurance – you can protect yourself from these risks, and continue to do business in these markets

3. You Want To Limit Bad Debts 

Bad debts can be a big cash-flow drag. If you want to limit bad debts in your credit management strategy and avoid the expense of trying to recover bad debts, then credit insurance is a must. You can get paid even if your partner companies fail to pay – or even enter bankruptcy.

4. You Need To Preserve Your Working Capital & Cash Flow

If you run a small-to-medium-sized enterprise (SME), chances are that you don’t have the same amount of working capital or cash flow as a larger company. An interruption – such as a major client entering bankruptcy or defaulting on a debt – can be catastrophic. Until the issue is resolved, you may have to take actions like taking out loans, freezing raises or even letting employees go.

Your trade credit insurance policy will help cover the cost of the unpaid debt, ensuring your working capital and cash flow are preserved.

5. You Want To Offer Better Credit Terms To Customers 

Using trade credit insurance allows you to offer better credit limit options and payment terms to your customers. Because your credit insurance policy will cover your costs if your client defaults, you can afford to offer better terms – and beat the competition. 

You can extend credit limits and repayment terms with confidence, knowing that you are protected in the rare event that your client does not pay in a timely manner.

Is Trade Credit Insurance Right For You? Find Out With Niche Trade Credit Now!

At Niche TC, we provide your business with the protection it need. As a leading trade credit insurance broker, we can help you through the entire process. Contact us today on 02 9416 0670.

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