It has been estimated that 18% of companies which fail, do so as a result of having bad debt or poor working capital. This reinforces the thinking that, whilst businesses will do all they can to pro-actively protect physical assets like property and equipment, they will often neglect to cover the receivables which inevitably make up a substantial amount of their assets.
However, companies of all sizes can mitigate the threats of losing out on trade credit income by investing in credit insurance.
Quite simply, credit insurance companies provide businesses with protection against the failure of a customer to pay their trade credit debts. The reasons why a customer may not be able to make good on their credit debts are many and varied and can range from becoming insolvent to failing to pay within an agreed credit period.
These risks are known as commercial risks and these are what standard credit insurance plans provide cover for. However, various forms of cover can often be tailor-made to accommodate a variety of non-standard risks. For instance, export companies can use insurance plans to protect themselves against a range of political risks which may prevent or delay payment such as civil war in a customer’s resident country; forced contract cancellations or government embargos.
Affordable and versatile trade insurance solutions to suit companies ranging from small SMEs to large multi-nationals are available from Euler Hermes, one of the world’s leading credit insurers. Visit www.eulerhermes.co.uk now to find out more.