As someone running a business, you will be only too aware of the damage that bad debts can have on the health of a company. Unfortunately bad debts are a fact of life & the effect of a major loss could wipe out a year’s profit or worse. We have seen high profile failures including Comet, JJB Sports, MFI (second time), Woolworths, Habitat, Karen Millen, Focus DIY and more recently, HMV, Cameron Balloons, Blockbuster, Clinton Cards, TJ Hughes, Jane Norman, Saab, Aquascutum, Past Times, Game & Peacock Stores that have gone into administration or receivership with a devastating roll on effect to suppliers.
If you are looking to expand your business into new markets or territories but are worried about the risk of non-payment or complicated collection & legal situations, a bespoke Credit Insurance policy could make perfect business sense.
What is Credit Insurance ?
Put simply, a Credit Insurance policy will indemnify you following the insolvency or default of your trade credit customers. A policy will provide valuable information on potential new customers as well as existing accounts. It is commonly referred to as ‘sleep insurance’ as it allows you to concentrate on running your business without worrying about your largest customer going bust.
A Credit Insurance policy is not filed away or put in a frame on the wall. It is a useful credit management tool that will enhance any existing credit control. Most policies have the option of a built in collections & legal service. In fact any insured debt which remains uncollected after a reasonable period of time is paid out as if the company was insolvent. If you are a manufacturer or distributor of bespoke goods you can also cover the pre-delivery and work in progress risk should a customer default prior to delivery.
We can arrange a policy specific to your company’s needs including protection for single debtor, your top customers or whole ledger. You can also exclude certain ‘blue-chip’ accounts. Credit Insurance underwriters have been unusually quick to adapt to the changing needs of business as we emerge from the recession so if you have had quotes in the past or in fact previously insured it is a good time to reconsider.
Benefits of Credit Insurance
- Compliments and enhances good credit management procedures.
- Collection of debts, especially in the case of slow payers is significantly enhanced.
- The likelihood of being hit by a potentially damaging bad debt significantly reduced due to Underwriters' in-depth market intelligence.
- The need for sizable bad debt reserve is considerably reduced, with the resulting benefit of enhanced cash flow.
- More effective targeting of your sales effort so that marketing initiatives ensure a quality customer base.
- Minimises the friction that can arise between finance and sales - "A sale is not a sale until it is paid for"
- Balance sheet and profits protected, thus maintaining your competitive edge.
- Fast replacement of working capital in the event of a loss.
- The security afforded by a credit insurance policy can be utilised to obtain enhanced levels of finance and improved terms.
Who can benefit from Credit Insurance?
- Any company selling to another company on credit terms could benefit from Credit Insurance.
- Have you experienced problems of non-payment or bad debt, or have you experienced problems with suppliers who can’t pay because they are not being paid?
- Companies expanding into new markets or territories.
- Businesses with competitive pressures from new players in the market.
- Refinancing, the policy can be assigned as collateral to secure additional funding or finer rates.
- Companies with a heavy concentration of risk with one dominant customer.
- Particularly businesses trading in Construction, Food, Electronics, Retail, Automotive, Telecoms, Transport, Agriculture, Engineering, Textiles, Metals, Timber, Recruitment & Aggregates as well as suppliers to the same.
There are two options for exploring your Credit Insurance requirements. The first is a bespoke brokerage assessment entailing multiple options from different insurers that will accurately match your specific needs. If you would like to arrange to meet with a broker, please call us on 01604 217333.
For more information or assistance please email our helpdesk or telephone 01604 217333