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What Is Trade Credit Insurance?

Trade credit insurance protects your business against both commercial and political risks that are beyond your control. It improves the quality of your bottom line and helps you to grow profitably, minimising the risk of sudden or unexpected customer insolvency. Credit insurance gives you the confidence to extend credit to new customers and also improves access to funding, often at more competitive rates. Trade credit insurance is for short-term account receivables i.e. those due within 12 months.

It is balance sheet protection and gives you the confidence to not only know that your debtors book is protected but to minimise the risk of doing more with your customers as well as engaging new clients.

Here is a video produced by one of our Trade Credit Partners, Euler Hermes:-

Trade credit insurance is a product which not only protects what you do and minimises the risks your business currently face but is a tool in which your company can use to grow and achieve the goals for your business much quicker than you would if you had to mitigate your ambition to factor in the risk of customer default. Its a genuine way in which insurance products can be used to help business grow and develop.

Credit insurance protects your company against the failure of your customers to pay their trade credit debts owed to you. These debts can arise as a result of a customer becoming insolvent or failing to pay within agreed terms and conditions (i.e. “protracted default”).
Ravenhall have access to a wide range of leading trade credit insurers, as such we are best positioned to help you understand the different products that are available and to work out what your business needs.
How it works is simple: Insurers monitor the financial performance and well-being of your customers. They allocate each of those customers a grade that reflects the health of their activity and the way they conduct business.
Based on this risk assessment, each of your buyers is then granted a specific credit limit up to which you, the insured, can trade and be able to claim should something go wrong. This limit can be revised upward or downward as new information becomes available.
Trade receivables can represent up to a third of the total assets on a company’s balance sheet. Managing your trade receivables effectively therefore plays a key role in:
  • Delivering comprehensive protection against the risk of insolvency
  • Enhancing your customer relationships
  • Improving banking relationships and access to finance
  • Supporting sales expansion

If your company’s profit margin is 5% and one of your buyers defaults on a debt of £100,000, then you will have to produce additional sales worth £2,000,000 to make up for lost profits.Non-payments weaken your company and lower its investment capacity. A credit insurance policy helps manage your account receivables and mitigate your losses in the event of non-payment.We can tailor our credit insurance solutions to your company’s size, sector and business needs. Discover more about our credit insurance solutions for small-medium enterprises (SMEs), large-sized business and multinationals by speaking to one of Ravenhalls Team of specialists, click here for more contact information or call 0845 216 3000

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