What is Trade Credit Insurance

What is Trade Credit Insurance?

Bad debts. There is nothing more frustrating than not getting paid for the work and services you have provided.

It can be a destabilising situation; plans you had for the cash go out of the window. You may have to self-finance or write off the debt, leading to strategic changes, undermining competitiveness, and even causing a business to fail.

“Trade Credit Insurance transfers bad debt risk, protecting your cash flow” Alan Body, Account Executive.

If your day-to-day business involves extending credit to your clients in either a domestic setting or an export market, you leave yourself open to the risk of default or insolvency – July 2024 has just seen 320 compulsory liquidations (the highest number since before COVID-19, and 1,691 creditors’ voluntary liquidations.

Trade credit insurance (TCI) is a solution for managing bad debt credit risk. It aims to help your business grow “securely” by protecting it against losses from unpaid invoices and, ultimately, your cash flow.

Benefits of Trade Credit Insurance

Trade Credit Insurance provides you with a level of ‘financial comfort’ when it comes to unpaid invoices, where you can choose to protect against bad debts from all your clients, a group of clients or individual clients.

To avoid unpaid debts and help you manage receivables more effectively, trade credit insurance includes:

1. Bad Debt Recovery – your insurer will try to recover or payout for the loss of income due to bad debts.
2. The client went out of business – your insurer will settle the unpaid losses.
3. Credit checks – Offer clients competitive credit terms to win and retain business.
4. Monitoring service – protect your cash flow; be kept up to date with the creditworthiness of clients.

What commercial risks does Trade Credit Insurance cover?

Trade credit insurance is a powerful tool for controlling commercial risk. It covers:

• Extended payment defaults (late payments).
• Bad debts arising from customer insolvency.
• Political risk: non-payment resulting from political or climate-related events, currency restrictions, interruption of trade or expropriation.

How does a Trade Credit Insurance policy work?

You provide us with certain information about your company and clients.

Together with our insurer partners, we assess the financial health of your customers and draw up credit limits and commercial terms and types of cover to suit your particular needs.

Types of cover include:

• Whole turnover
• Selective accounts / single contracts
• Top-Up Credit Limits
• Domestic / Export
• Political Risks
• Specialist Cover

Who is it for?

Any business can purchase Trade Credit Insurance, but we typically arrange it for the following sectors:

• Removals and Storage
• Recruitment
• Wholesale and Distribution
• Manufacturing
• Import and Export businesses
• Construction
• Engineering

We can’t predict the future. But we can help you understand and analyse the risks associated with proper customer payment while arranging bad debt protection. When you partner with Jensten, you have access to all the qualified information and assessments you need to manage your credit decisions. This means you can offer competitive credit terms with complete confidence. Trade Credit Insurance is a solution that gives you peace of mind, minimising risks and opening the door to new opportunities for growth!

– Alan Body, Account Executive