Trade Credit Insurance (TCI) is a form of protection that can be purchased to cover the riskiest parts of doing business with many countries. The company’s commercial customers may not have enough money or resources, but you’re covered no matter what!
TCI offers policyholders the ability to be compensated for unpaid debt up until their coverage limits. The company can more confidently extend credit, knowing they will eventually get paid back if anything goes wrong with a customer’s financial position; this is an advantage of using insurance! If you want to protect your business from non-payment of accounts receivable, you must consider trade credit insurance. Trade credit insurance in India protects your revenue, reduces your risk of bad debts, and increases your working capital. Learn how it works and why you should get it for your business. You’ll be glad you did once you’ve seen the benefits.
Protects your business against non-payment of accounts receivable
Non-payment insurance protects your business from loss when a customer fails to pay an invoice. It is a valuable tool for managing accounts receivable and safeguarding cash flow. It can also help structure re-payment schemes for unpaid invoices, saving you time and money. On average, a business has five outstanding invoices at any time, resulting in an hour and a half of labour per day.
Accounts receivable are an essential part of a business’s balance sheet, but it is often underestimated. In fact, for many businesses, accounts receivable are the most significant asset on their balance sheet. If you’re a small to midsize business, protect it by leveraging it. Consider trading credit insurance. A trade credit policy will protect your business from the financial loss resulting from non-payment of invoices due to the customer default, insolvency, or bankruptcy.
Reduces risk of bad debts
Taking out trade credit insurance is a great way to manage bad debts and protect your capital and cash flow. Accounts receivable represent up to 40% of balance sheet assets. While you should always strive to deal with creditworthy clients, businesses may become insolvent at any point. This can lead to a loss of profits and revenue for your company. You can avoid such a fate with trade credit insurance by making informed credit decisions.
This insurance protects your business from losses on bad debts and enhances your primary security. It also helps increase advance rates to 90 percent of qualifying receivables. This is especially helpful if you have a high percentage of export receivables. Furthermore, trade credit insurance is tax-deductible, making it a significant financial investment. But before you take out trade credit insurance, it’s essential to realize that there are other benefits to trade credit insurance.
Increases working capital
Most businesses offer their goods and services on credit to customers, and this often means that a large part of your working capital is held in accounts receivable. While you can take steps to reduce the risk of this type of loss by diversifying your receivables, even a tiny amount of bad debt can have significant consequences. This is where trade credit insurance comes in. Trade credit insurance protects you from even small losses that could cripple your business.
Offering credit terms is financially rewarding, but it is also risky. Even if your customers pay on time, they might shut your business down, destroying your profits. Fortunately, trade credit insurance can protect your business against the risks of losing your receivables if a customer goes bankrupt or defaults on their payments. Using trade credit insurance to protect your business is a smart move that will make your business safer in the future.
Protects your revenue
In B2B, offering credit terms to your customers can be a profitable endeavour. However, it is also risky and may result in your clients’ bankruptcy or protracted default, which can have disastrous consequences for your bottom line. Trade credit insurance protects your revenue by offering coverage for the receivables of your customers, preventing you from incurring a large amount of debt due to non-payment. Moreover, it can help you expand your sales to new sectors and increase your revenue.
In addition to preventing you from losing your revenue, a trade credit insurance policy will also cover your existing customers. Trade credit insurance will help you identify potentially problematic customers and adjust your credit limits when the economic conditions change. Self-insurance is also an option, but it forces you to reserve some of your capital for inadequate debt reserves. Thus, you can’t invest in growth opportunities as a result. Instead, trade credit insurance will allow you to expand your business and improve your risk management strategy.
TCI offers a range of financing options to suit the needs and financial capabilities of buyers in our industry and non-traditional businesses looking to purchase large equipment. We make it possible, so you can focus on running your business instead!