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Although credit insurance has been around for a long time it is surprising how many businesses are not fully aware of its benefits. So what is it, how does it work and why should you take out such protection?
Our specialist credit insurance partner explains “Credit insurance is a policy that protects you against your credit account customers not paying you; either through insolvency/bankruptcy or protracted default (can’t pay / won’t pay but whom do not go insolvent / bankrupt). It is a risk protection product covering, possibly your largest asset, your debtor book. Incurring a large bad debt without such protection has been known to have a domino effect; it can bring you down with it.
Although a whole turnover policy remains the most popular cover, credit insurance is more flexible these days. You may wish to insure just those names that would hurt you if the outstanding invoices were not paid, say your top ten customers. This has been referred to as catastrophe insurance. Other alternatives may be to exclude some of your large well-known customers, which you may consider undoubted, covering the remaining customers over a certain value. Single risk cover is also available although the insurers are very selective on the names they will cover on this basis.
A policy actually brings you three products in one, it is a complete credit management package. Most credit insurers have their own Internet based credit checking system, which enables you to obtain an instant answer in checking out the credit worthiness of a potential customer. Directly you click the mouse, that name is added to your policy, the main part of the product set. The third, available from most of the insurers, is a debt collection service whereby the insurer will pick up and chase the debt on your behalf after a set period of time that feeds off your own credit control procedures.
You may ask yourself "do I really need this"; can you identify yourself with any of the following? Do you keep incurring bad debts however hard you try? Do you have all your eggs in one basket e.g. a small customer base dominated by one or two names? Are you considering expanding by entering a new market / location where you have little knowledge of the area / people you will be dealing with? The latter could include exporting.
In the plethora of risk protection products this is a very obvious one, which is often overlooked. Our partner concludes “Many of our clients tell us that a policy gives them peace of mind and allows them to sleep more easily at night. This might sound rather glib but in reality it has proved to be correct”
If you’re interested in finding out more about how our services can help your business: Call us on 0845 051 4588 NOW!
© Business Finance Plus Ltd 2010
Business Finance Plus Ltd, Castle Court 2, Castlegate Way, Dudley, West Midlands, DY1 4RH
Tel: 0845 051 4588 · Fax: 0845 051 4589 · Email: info@businessfinanceplus.co.uk
Reg No. 4822723 (England & Wales) Reg Office: Castle Court 2, Castlegate Way, Dudley, West Midlands, DY1 4RH
