Trade credit insurance protects your company against losses because of the bankruptcy or default of accounts clients. Trade credit insurance may be applied as a risk management tool to secure your small business.
Trade credit policy may protect against: insolvency ,default and political risks.The actual risk is in the large and unexpected losses arising from the collapse of debtors that may be catastrophic to your company.
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Advantages of Trade Credit Insurance
1. Reduces the risk of reduction
Trade credit insurance provides a safety net against non-refundable bills by national and/or worldwide buyers. Among the greatest, in addition to the very at-risk of all of your assets is the receivables.
2. Improves market penetration/sales expansion
Credit insurance permits you to expand your company with no hassles. You may boost the credit lines along with your present clients or provide more competitive conditions of charge into the buyers. It gives a competitive edge when it comes to exports.
3. Increases access to the working capital fund
If your accounts receivable are insured under credit, then export accounts receivable in addition to concentrations of charge are contained in security borrowing base calculations of the lending company.
This allows you to receive cost-effective working funds which then can help you to not just increase, but also prevent cash flow issues.