Trade Credit Insurance
Trade Credit Insurance
Trade Credit Insurance covers businesses from losses related to insolvency or nonpayment, allowing them to keep trading for years to come. Regardless of the sector (Motor Trade, Manufacturing, or Retailers etc) if you supply a product or good you can take out Trade Credit Insurance to protect your business.
There are many a risk associated with the sale of products and goods, many of which are beyond a supplier’s control. One of the greatest risks is the failure of a buyer to pay for the goods or services it purchases, which can have a disastrous effect on the viability of a supplier.
What Is Trade Credit
It covers businesses against loss that results from nonpayment by a client. In the event of nonpayment, businesses can raise a claim with their broker which can grant repayment for a portion of the original loan, usually around 90%.
Trade Credit Insurance also provides political risk insurance, which covers the risk of non-payment by international customers due to factors outside of their control, such as Expropriation/government interference. Transfer & Conversion. Political violence.
Trade Credit Insurance is unique in that it is an ‘open policy’ meaning you can continually add clients to the policy throughout the year. This allows you to continue trading and expanding your client base with peace of mind.
How does Trade Credit Work
Trade Credit provides clients with a policy that is an alternative to pre – or upfront payment. This means that growing businesses can order or supply essential products without relying on upfront payment, allowing them to generate sales and establish new connections with consumers.
Whether you are conducting business locally or internationally, operating with Trade Credit means the payment is not secure until it is in your account. This leaves your business vulnerable to risks, which is where this type of insurance protects you.
Why Choose Konsileo for your Trade Credit Insurance?
The level of cover varies for each business and includes considerations for location, size, sector, profitability, and past claims history. It is imperative you take out the correct cover. If it is not done properly, you could be faced with a hefty financial loss.
Here at Konsileo, our team have a wealth of specialist experience, dealing with a multitude of businesses in a wide range of sectors. Their combined market and policy knowledge provides them with the expertise required to advise and tailor Trade Credit Insurance to your unique needs. Contact one of our specialist trade credit brokers today to protect your business, properly.
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Frequently Asked Questions
Trade credit insurance typically covers losses arising from:
- Customer insolvency or bankruptcy.
- Administration, liquidation or receivership.
- Protracted default (where a customer fails to pay after a specified period).
- Political risks for overseas customers, depending on the policy.
- Commercial risks associated with trading on credit.
Every policy is different, so it's important to understand the specific cover, exclusions and conditions that apply.
Trade credit insurance does not cover every type of financial loss. Common exclusions may include:
- Sales made above an approved credit limit.
- Disputed invoices where goods or services are challenged.
- Cash sales or payments made in advance.
- Fraud committed by your own business.
- Transactions that fall outside the policy terms.
Your broker can help explain any exclusions and ensure your business remains fully protected.
The cost of trade credit insurance depends on several factors, including your annual turnover, industry sector, number of customers, countries you trade with, claims history, and the level of cover required.
Premiums are generally calculated as a small percentage of insured turnover. For many businesses, the cost is outweighed by the financial protection, improved cash flow, and confidence to grow sales safely.
Yes. If your business relies heavily on a single customer or a small number of key accounts, Single Buyer Trade Credit Insurance may be the ideal solution.
This type of policy protects your business against non-payment from one specific customer, providing valuable protection where losing a major account could have a significant financial impact.
Single Buyer Trade Credit Insurance is designed for businesses that have a high exposure to one customer. Instead of covering your entire sales ledger, the policy protects just one named buyer.
It offers many of the same benefits as a whole turnover policy, including protection against insolvency and non-payment, while providing a cost-effective solution for businesses with concentrated customer risk.
Yes. By protecting your outstanding invoices against non-payment, trade credit insurance helps maintain healthy cash flow and reduces the financial impact of bad debts.
Many lenders also view insured receivables more favourably, which may improve access to invoice finance, trade finance or other business lending facilities.
Yes. Banks and finance providers often regard insured debts as lower risk, making it easier for businesses to access funding facilities such as invoice finance, factoring, asset-based lending and working capital finance.
Trade credit insurance can strengthen your balance sheet and provide lenders with additional confidence.
Protracted default occurs when a customer fails to pay an undisputed invoice within the period specified in your policy, even though they have not become insolvent.
Most trade credit insurance policies provide cover for protracted default, ensuring businesses are protected against customers who simply fail to pay despite repeated collection efforts.
In most cases, trade credit insurance premiums are treated as a legitimate business expense and may be tax deductible. However, tax treatment depends on your individual circumstances and current tax legislation.
You should always seek advice from your accountant or tax adviser regarding your specific business.
A specialist trade credit insurance broker provides independent advice, compares policies from multiple insurers and helps secure the most appropriate cover for your business.
Your broker will also support you with credit limit applications, appeals, policy administration, claims, renewals and ongoing advice, ensuring you receive maximum value from your trade credit insurance policy while saving time and protecting your business.