Trade Credit Insurance: A Shield for Your Business
Trade Credit Insurance is a financial tool that protects your business from the risk of non-payment by your customers. By insuring your accounts receivable, you can safeguard your cash flow and mitigate potential losses.
What Does Trade Credit Insurance Cover?
A typical Trade Credit Insurance policy covers:
- Protracted Default: Delayed payments beyond a specific timeframe.
- Insolvency or Bankruptcy: Customer's inability to pay due to financial failure.
- Contract Cancellation: Unexpected termination of contracts.
- Political Risks: Events like political instability or trade restrictions.
What Doesn't Trade Credit Insurance Cover?
Some common exclusions include:
- Advance Payments and Letters of Credit: Sales secured by these methods are typically not covered.
- Related Parties: Sales to subsidiaries or affiliates are often excluded.
- Government Bodies: Sales to government entities may not be insured.
Key Benefits of TCI:
- Enhanced Cash Flow: By mitigating the risk of bad debts, TCI can help businesses maintain a steady cash flow.
- Improved Credit Management: TCI encourages disciplined credit management practices, such as setting credit limits and monitoring customer risk.
- Increased Sales Opportunities: TCI can enable businesses to extend credit to more customers, potentially boosting sales.
- Enhanced Financial Strength: By reducing credit risk, TCI can strengthen a business's financial position and improve its creditworthiness.
Types of Trade Credit Policies
