What You Need to Know About Trade Credit Insurance


Will your business be protected if a customer doesn’t pay their invoice?

If your answer is no, then you might want to consider purchasing trade credit insurance. Read on for more information about how trade credit insurance can help your business and if it’s the right option for you.

What is Trade Credit Insurance?

In the simplest terms, trade credit insurance protects businesses from the non-payment of commercial debts. So, if you have trade credit insurance and one of your customers pays very late or doesn’t pay at all, your policy will pay out a designated percentage of the debt you’re owed.

According to Insurance Business America, “Accounts receivables typically represent more than 40% of a company’s assets, but one in 100 invoices become delinquent.”

If you don’t have trade credit insurance, then you could be putting your business in an incredibly vulnerable position.

Benefits of Trade Credit Insurance

You might be thinking that the last thing you want to take on is another monthly expense, but in most cases, the cost of trade credit insurance is outweighed by the benefits, which include:

  • Better cash flow. Having trade credit insurance can help you maintain cash flow, even if customers are behind on their payments.
  • Reduced risk. Your business’s bottom line is dependent on getting payments on time. Trade credit insurance can give you peace of mind that you’ll be covered if a customer defaults.
  • Possible increase in sales. Knowing that you’re protected with trade credit insurance may make you feel comfortable offering customers more favorable credit terms, which could lead to more sales.
  • More support. Most trade credit insurers can analyze the financial status of potential customers and monitor their portfolios to help you determine if a prospective customer will likely be able to meet their financial obligations.

Does your business need trade credit insurance?

If you own a small business with plans to grow, but you have concerns about your financial health or you have customers with high credit risk, trade credit insurance is probably a good option for you.

However, don’t wait until a credit problem arises to consider getting trade credit insurance coverage. Instead, look into your options when business is good, so you know you’ll be protected if something does go wrong down the line.

Interested in more small business management tips? Here’s an archive of some of our news articles that you might find helpful.