Credit insurance can protect your business against potential losses when you trade on credit and help you grow your trade. Having a policy means you do not need to set aside funds for any losses and you will often have easier access to loans in a bank. Your policy will give you access to thorough credit assessments that reduce the risk of you having to reject potential customers due to an inability to assess the risk of loss by doing business with them.
In short, credit insurance protects you against losses, while helping to increase your credit capacity and ultimately increase earnings. But is it the right tool for your business? If you operate in a market where cash is king and credit sales are never required, it might not be right for you. Here we have collected the most important factors for you to consider when thinking about whether credit insurance is the right solution for your company:
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How often do you sell on credit?
A credit insurance policy is only relevant if you have significant credit trading or customers who demand trading on open account.
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What type of goods or services do you sell?
If you sell custom-made products that can only be sold to one buyer, we can often insure them during the production phase.
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What is your concentration risk?
Diversification of your portfolio can help you mitigate risk. This can be geographical, across different sectors or types of companies.
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What are your profit margins?
The lower your company's profit margin, the longer it will take you to recover from a loss.
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What is the size of your customer base?
Credit insurance is valuable regardless of whether you have a lot of customers or just a few large customers. If there are many, we can help you assess new ones and monitor the existing ones. If there aren't many, then we help remove some of the risk associated with having a few large customers.
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What is your knowledge of your customers and the markets you trade in?
If, for example, you are growing in new markets, your credit insurer can help assess trade risks and customers based on their local expertise and often insurers have access to confidential information, that can benefit you.
Why not book a call with one of our credit insurance advisers? They can help you identify whether credit insurance is right for you.
