Credit insurance is an interesting product that is receiving a lot of talk and becoming a product of interest for many companies.
Most companies extend credit terms to their customers, so that payment can be made after their products have been sold. Credit insurance protects you against unexpected or catastrophic losses due to customers' insolvency or non-payment.
There are many benefits to credit insurance, some of which are obvious and others that are a bit more hidden. Credit insurance strengthens your balance sheet by securing your cash flow. This makes you more attractive to banks when looking for your own financing. Lending institutions may extend more favourable financing terms if they are named beneficiary on a credit insurance policy. This could mean lower interest charges and reduced borrowing costs.
While all companies should consider credit insurance, it is particularly useful for companies that:
The impact of a single credit loss could be the equivalent of the gross profit on several months of new sales. Credit insurance is definitely worth taking a look at and making an educated decision as to if it is right for your business.