Trade Credit
KEYS TO TRADE CREDIT INSURANCE
• Protection against unexpected loss due to non-payment or insolvency from a customer
• Streamline and enhance credit practice to prequalify, evaluate and monitor credit
• Collaterize ineligible receivables for additional access to working capital and lines of credit
• Obtain political risk protection for export sales (currency, import/ export changes, foreign government)
• Release bad debt reserves to free up cash flows
• Safely expand sales to new customers, new markets and international markets by extending terms
• Create competitive advantage to credit, sales, financing
What are reasons companies want trade credit?
• Sales Growth – extend terms, enter new markets, increase AR exposures
• Risk Mitigation – protect against unexpected losses
• Bank Financing – collaterize ineligibles – concentrated, cross aged or foreign
• Credit Management – outsource and streamline a formal credit practice
Who is a good prospect?
Companies with $3M+ in annual sales
Especially important for the following industries:
• Manufacturers, Distributors and Wholesalers
• Transportation
• Commodities
• Staffing
• Exporters
What does trade credit cost?
Approximately 1/10 of 1% – 1/3 of 1% of insured sales, ie: $20M company is $20-$40k a year in premium
Do you have to insure entire portfolio?
No, policies are customizable around defined divisions, industries, named coverage or logical segments
What are the perils?
• Formal Insolvency – Notification of formal bankruptcy
• Non Payment – Most carriers give a window from shipment to file claim to work with slow payment or non payment
For additional Trade Credit resources, Contact Gary Daggett
