Cash flow is one of the important things to manage in running a business. It is the backbone of your business’ operating costs, taxes, purchasing inventory, and even the salaries of the employees. But challenges can be present in handling your financial flow. For instance, the inconsistent and delayed payments of the clients to their suppliers – which undeniably can bring risk at one’s business.


To prevent the potential financial loss, Trinity now offers a suitable product that amends and protect your business flow: Trade Credit Insurance.


WHAT IS TRADE CREDIT INSURANCE?

Many businesses opt for credit terms as a payment method of their goods or services. This gives their customers the advantage of ‘Buy now, pay later’ concept as it allows installment plans and sometimes gives reward points. However, this kind of payment method also possess risk to the business, which may include the customer’s inability to pay their credit on given time.

With trade credit insurance, it ensures protection against non-payment and unexpected losses. This also follows a risk assessment for your business. If a buyer defaults or becomes insolvent, you can claim losses up to the specific credit limit.

In simpler terms, trade credit insurance recovers the unpaid debt of the customers, while safeguarding the financial flow of your business.  

WHY DO YOU NEED IT?

Trade credit insurance improves the quality of your business’ bottom line through the following:

Comprehensive protection against risk of insolvency: Trade credit insurance allows your business to operate without the worries of financial setbacks, as it insures the customer’s unpaid debt and late payments.

Enhanced customer relationship: Trade credit insurance can build a strong partnership with your customers as it presents flexibility of credit terms, making your business more appealing and competitive in the market.

Improved banking relationships and access to finance: This type of insurance does not only protect your financial flow, but also manages it. As a result of your company’s ability to manage the risks, financial institutions may develop trust with it.  

Greater confidence in pursuing commercial opportunities: With trade credit insurance, it can give you the confidence to grow your business, such as committing to larger deals that might be considered too risky. This also allows you to make more informed decisions about marketing opportunities while minimizing potential losses. 

 

COVERAGE OF TRADE CREDIT INSURANCE

Trade credit insurance policy is based on a risk assessment of your business. As part of this process, each of your buyers will be granted a specific credit limit, allowing you, the insured, to trade within that limit and be able to claim if risks arise. The potential risks covered include: 

Insolvency: If your customer is declared bankrupt or insolvent, this insurance protects your business, ensuring you still receive compensation for the unpaid debts.

Protracted Default: In addition to insolvency, this type of insurance also covers Protracted Default. This defines the inconsistent and delayed payment of your customer beyond the agreed credit terms.

Failure of the exchange authority in buyer’s country to transfer foreign currency: Trade credit insurance can assure your business internationally. It can be protected against the risk of not being able to convert foreign currency or transfer payments.

 

Coverage Features

  • Domestic and export sales
  • Accounts receivable arising from sales made during the policy period
  • Top 50 buyers
  • No restrictions on product origin
  • Ground-up cover with no deductible
  • No non-qualifying loss amount
  • Cost-effective limit assessment and collection services
  • Minimal reporting/administration requirements

 

Coverage options

  • Pre-shipment cover on a case-by-case basis
  • Debt falling due in policy period

 

In conclusion, trade credit insurance protects your business flow by mitigating the risk of insolvency, protracted default, and international trade. This insurance benefits you as it empowers your company in building partnerships with your customers, strengthening your financial flow, and having access to commercial opportunities and growth.

At Trinity, we consider what is best for you and your business, as we intend to protect and mitigate the risks of trade credit. To know more about Trinity’s Trade credit Insurance, email us at: trinity@trinity-insures.com. 

 

Sources:

https://www.investopedia.com/trade-credit-insurance-5190219