Credit insurance is insurance that in practice covers the costs of unpaid invoices from client companies. This can be due to either your client’s insolvency (e.g., bankruptcy) or unwillingness to pay in disputes. Credit insurance operates in both domestic and international trade.
In foreign trade credit insurance also provides security for e.g. political risks.
Credit insurance complements credit control processes
Credit insurance encourages good credit management practices and provides confidence to increase sales to your creditworthy clients.
Quick credit insurance indemnities ensure that your credit loss does not become too great and jeopardize your company’s cash flow. Many credit insurers today also offer an international collection service, and credit insurance can cover some of these costs.
Often, financiers welcome the fact that you are covered by credit insurance. Credit insurance is suitable for almost all companies engaged in credit trading, regardless of industry.
Credit insurance is becoming more widespread in SMEs
For large international companies, credit insurance has been common for a long time. For example, Finnish forest industry companies have been using credit insurance for decades. However, credit insurance is also becoming part of credit risk management for SMEs.
The information services and collection provided by insurance companies facilitate credit management processes and your own workload.
Today, interdependencies and subcontracting relationships between companies are extensive and tight. Knowing your own clients well is no longer enough. In order to be successful in anticipating problems, you should also know your client's customers very well as well as the suppliers your customers use.
Most of the time, some small detail goes unnoticed. It is also not possible to anticipate all surprises.
Credit insurance works especially well when...
- you want to secure your trade receivables from credit losses
- you are applying for support for your credit control
- you need information about your customers ’creditworthiness
- you want to take advantage of a professional debt collection company to repatriate your debts
- your business regularly sells to new customers or new markets
- you need help analyzing your clients ’financial status
- you want to develop your company’s cash flow and shift credit risk off
- your own shoulders.
Would you like to hear more about credit insurance? Contact our experts!