Amidst the ongoing COVID-19 pandemic, most, if not all, of the businesses from all industries face various kinds of financial challenges now. And it gets even harder to sustain knowing that small and medium enterprises are competing with the crisis and with one another. As a result, the ordeal of maintaining a healthy cash flow is very difficult, let alone to ensure if the business will survive.
But despite the uncertainty around, there is still an effective way of mitigating financial risk and that is by acquiring trade credit insurance. And if you’re interested to know more about this, then we encourage you to continue reading as we are going to know more about this type of insurance and the benefits of having it for your business.
Definition Of The Term
A trade credit insurance is a type of policy that is designed to protect businesses from financial losses due to unpaid receivables, default accounts of customers, and even bankruptcy. Basically, it protects your company from the risk associated with financial issues due to receivables and loss of customers. That’s why experts see these as one of the most practical investments that you can get for your business.
How Does It Benefit You As A Business Owner?
A trade credit policy is created to suit your needs as a business owner while offering some of these important benefits:
- Improved Sales – It allows businesses a chance to improve their sales revenues despite continuing health crisis by offering favorable credit terms to existing customers and future prospects. Aside from that, it also enables you to offer more competitive modes of payment as compared to your competitors while protecting your business if in case they can’t pay on time.
- Improved Cash Flow – Cash flow problems due late or to non-payments of customers are primary reasons for insolvency. But once you purchase a trade credit policy you are assured of getting paid immediately after the buyer is broke. Likewise, it also allows you to outsource collection servicing without additional cost.
This statistic is very crucial as it will determine how sooner you get to a late payment and the chance of recovering from debt as a result. And in the end, the losses are covered so your business can maintain a healthy cash flow.
As added information, a customer’s non-payment due to the COVID-19 crisis falls under “Political Risk” or the failure to pay as a result of situations or events beyond the policyholder’s control.
- Reduce Concentration Risk – A credit insurance plan mitigates any risk for business owners who are mainly dependent on a certain group of customers. In other words, if your business is not doing good since your bottom line patrons are buying anything from you due to the COVID-19 crisis, then you are still protected from the possibility of insolvency.
- Bad Credit Provision Reduction – Facing bad debt is nothing new to most businesses. But the good thing is a trade credit plan saves you from using some of your money to cover bad debt. And as a result, you’ll be able to use this cash for more practical initiatives that will allow your business to sustain and even grow in times of economic uncertainty.
Once you acquire this insurance plan, you now have the option to cover your bad debt at a later time and pay in a manner that is most convenient for you.
- Decreases The Cost Of Credit Management – Finally, purchasing trade credit insurance for your business enables you to make practical decisions for your business quickly without having to worry too much about the financial aspect. And this is beneficial for you especially now that we are facing a health calamity that can cripple down most industries.
Likewise, this can be a great advantage since the insurance provides the comfort you need to focus on the things that can help your business tolerate the effects of the COVID-19 pandemic.
So if you want to protect your business receivables from non-payment and insolvency, visit CreditInsrance.com, your free online resource to learn the ins and outs of credit insurance and risk management solutions. They provide unbiased information to help you make the best decisions for your business.