Most businesses that offer goods or services carry inventory debt. These debts are typically in the form of loans or lines of credit with their suppliers. When customers fail to pay their bills, that could put a financial strain on the supplier/lender. One way for businesses to protect themselves against uncollectible debts is with a trade credit insurance policy. Here are some reasons to consider credit insurance.
Manage Financial Risks
No matter how thorough a lender is with credit checks and analyzing financial backgrounds, unexpected events may still arise which render the customer unable to pay. When you have credit insurance, you can better manage financial risks in the event that your customer is unable to pay their debts.
Improved Cash Flow
You need to have enough money to cover the day-to-day expenses of your organization. If you have credit insurance, you’ll have the funds you need to cover the bills that keep your business going, even when customers fail to pay you for your services. That way, if the payments are delayed, you have enough money to keep your business afloat.
Better Monitoring of Credit
When you have credit insurance, the company keeps a close eye on your customers throughout the term of your policy. Access to that data allows you and your team to consider the credit worthiness of potential customers and their financial status throughout their existence.
When you have credit insurance, some carriers make it possible for you to offer higher credit limits to your customers. You may also be able to offer better payment terms and conditions to attract more customers to your business.
Resolves Trade Issues
Disruptive global events like political unrest, government interventions, and even currency problems could affect payments coming from your customers. If you have credit insurance, you’ll have added peace of mind knowing that you’re covered regardless of uncontrollable financial burdens.