This comprehensive guide to Trade Credit Insurance discusses the basics of protecting your business, benefits, pricing, the application process, and much more.
In the year 2018, over 6,078 businesses filed for bankruptcy under Chapter 11 regulations, and this is just one type of bankruptcy a company can file in the United States. If you combine these statistics with Chapter 7 and Chapter 13 bankruptcy filings, you end up with over 22,232 filings in a single year (U.S. Courts, 2018).
If you are a business owner, this number should be especially concerning. If a customer fails to pay on a large purchase, you could find yourself in financial trouble through no fault of your own.
You can help prevent this from happening and adequately protect yourself from the financial failings of customers thanks to something known as trade credit insurance. Our Accounts Receivable Insurance will provide an overview from how to apply, pricing and benefits. To learn more about Accounts Receviable Insurance terminology, download our Terminology Guide below:
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What Is Trade Credit Insurance?
Trade credit insurance is a specific type of insurance for business owners that protects your business from bad debts. If one of your customers defaults on a payment, your business can be protected from the loss.
How Does Trade Credit Insurance Work?
Trade credit insurance protects the cash flow of your business. If you fulfill an order for a client and that business is unwilling or unable to pay your company, you will still receive most of the money they owe you. Trade credit insurance will cover any default on a payment to you that was caused by client bankruptcy, default, or other specified political risks. Our policies here at Atradius cover up to 90% of the defaulted payment a client owed to you.
Who Needs Trade Credit Insurance?
Simply put, businesses of all sizes can benefit from trade credit insurance.
Large or International Business
A large business may be impacted by fluctuations or challenges in a market or region. Supply chains may be interrupted. Political unrest may impact trade routes or the ability for partners to do business. What if you are experiencing growth or investing in expansion and you need to protect your existing positions? All of these scenarios and more can be protected through trade credit insurance.
Small Business
You may think that just because you own a small business, you don’t need trade credit insurance. This couldn’t be further from the truth. A small business is especially liable to be impacted if one of its few clients fails to pay.
How Does Trade Credit Insurance Benefit You?
There are several ways in which trade credit insurance can benefit both you and your business. In addition to covering the customer debts which remain unpaid, having trade credit insurance typically comes with numerous additional features. Our guide will scratch the surface of benefits, but there are even more benefits not outlined here related to leveraging insurance for additional credit lines with your bank and increasing operating capital. Contact our experts or your lender to learn more about how credit insurance can benefit your business specifically.
Spotting Potential Problems
Atradius constantly monitors the creditworthiness of your buyers. This is a service that can help you evaluate a company, track customers, and estimate the likelihood a specific customer will pay if a certain amount of credit is extended. This can be monumentally helpful in spotting customers likely to default before it happens.
Here at Atradius Trade Credit Insurance, we help you monitor your portfolio with Atradius Insights. Learn more about these services here.
Less Risk in Client Acquisition
Having a trade credit insurance policy could help your business to expand to new heights. Maybe you recently received a request for a large order, but the buyer wanted to have it produced for them on credit. If you do not have trade credit insurance, this level of risk may be too high for your organization to take on. Trade credit insurance will empower you to take the risk and open a new door to a large client.
Expand Your Business
In addition to helping you extend credit to customers stress-free, trade credit insurance can help you grow your business into other countries where the political climate previously dictated a high-risk investment. Some trade credit insurance plans even come with country reporting features that can help you research new markets and the risk to enter said markets. For more on international trade conditions, please review our global risk map.
Competitiveness
As a small business, you may feel it is a struggle to stay competitive with the larger firms in your market. Trade credit insurance can help take you to new heights. It can empower you to accept the additional risk of new and varying clients by offering them credit without the worries. This will make it easier for your business to grow and become more competitive in your market.
No Need To Stress About Collecting Debt
Many business owners report that attempting to collect the debts owed to them is one of the most stressful parts of extending credit to clients. With a trade credit insurance policy like those offered at Atradius, your insurer will often work to collect the debts on your behalf. Learn more about debt collection services included with our policies at no additional cost.
How Much Does Trade Credit Insurance Cost?
The cost of a trade credit insurance policy will depend on the size of your business, the dollar amount of orders you usually process, the industry you are in, and your most active trade partners. No two policies are the same, but generally speaking, a policy is more expensive for companies that carry more customer debt. Here at Atradius, we are happy to put together a free, fully customized estimate with no obligation. Contact our experts at 800-822-3223 or fill out our Request a Quote form to get a free, no-obligation estimate today.
How To Apply For Trade Credit Insurance
The application for trade credit insurance is easy, and one of our experts is happy to help walk you through the process. One of our regional managers will help you to design the policy which is best for you and your company. Because of the individualization Atradius offers in its policies, no two policies will be alike.
Whether your business is large or small, trade credit insurance is something you need. Not only can it help you expand into new markets and gain more clients, but it can also give you peace of mind when it comes to customer debts. Don’t delay, give one of our experts a call for your free quote today!