Small business is generally tight on their cashflow, but needs to grant credit to their customers. The credit terms are not more than 30 to 45 days, but small business owners are under stress associated with defaulting risk.
While establishing buyers’ credit terms, small businesses depend on trade references, mercantile reports, and past trade experience to establish that is the potential buyer a worthy-credit risk. However, you don’t get real-time financial reports necessary to make decisions with full confidence.
Trade credit insurance is a good solution to protect your business from unpaid accounts receivables. Some businesses perceive credit coverage initially as an expense but will start to feel grateful when they need it most. Positive things associated with trade credit coverage can be experienced like –
- It is a great management tool because they offer credit limit decisions for your customers.
- You get real-time information because the insurance providers carry a vast database.
- It offers early warning signs to policy-holders, who accidentally extend credits to high-risk customers.
- It inspires aggressive trade deals with customers who make prompt payments.
- It is an inexpensive source to get short-term capital.
- Business owners feel secure in offering more credit to their customers, even the high-risk ones.
- Increase sales with current customers without widening their exposure.
- Expand their business in foreign markets.
- Exporters can gain a competitive edge.
- Bad-debt receivables get released. Trade credit policies are tax deductibles but not the bad debt reserves.
Niche Trade Credit Agency is an insurer that offers businesses of all kinds a tailored solution for protection and growth.
How does trade credit coverage agency work?
- The financial solidity and creditworthiness of your current and potential customers get checked with their huge database including myriads of businesses.
- The credit limit gets calculated with caution to determine the amount of acceptable risk that helps you manage your customer relationship.
- You trade as per the determined value limit set by the insurer. Thus, you are in control of your customer portfolio.
- If the customer fails, you get indemnification for the insured amount covered in the policy.
In this worldwide recession phase, the increased business decline [nationally and internationally], volatile market, and global credit tightening indicate that entrepreneurs need to be extra vigilant about their account’s receivables management. Trade credit coverage is a smart investment business can make to safeguard their cash flow, capital, and profits.
Who is trade credit coverage ideal for?
Trade credit insurance is ideal for companies selling their products based on an open account. For example, the profit margin of your business is 5% and a customer’s bad debt piles up to $100,000, on account receivables. To cover this loss, you need to create sales worth $2,000,000. Non-payment weakens your investment power but with credit coverage, you can deal this payment failure.
Trade credit indemnification process
Making settlement on trade credit claim is quick and simple. You will need to provide valid and stamped documents with the claim form. You can take help from your trade credit insurer.
Investing in trade credit insurance is a wise choice, but do research and identify why trade coverage is necessary!