To say that the South African economy has been persistently tough is an understatement. The risk to small businesses is increasing every day, as late payments and insolvency cause irreparable damage. Many small businesses tend to take on the risks of trade credit by themselves in an attempt to save costs. However, doing so might cost them their entire business.

What is Trade Credit Insurance?

Trade credit insurance manages this risk on your behalf. Trading with international markets may open up your business to problems such as sourcing financial information on new foreign clients – made even more challenging by the lack of transparency in legal systems of foreign countries. Trade insurers both take on this risk, and protect you against such risks in the future. Other benefits of having trade credit insurance include:

1. Late payments can be recovered

Should a customer violate their payment terms, the insurer will first try to recover the funds on your behalf and failing that, pay out your business according to the policy agreement, after a set period. Even after this, though, the insurance provider will still attempt to recover payment from the defaulting customer.

2. Protection and support according to your needs

Smaller businesses are unable to withstand big losses, which means that trade credit insurance should be a top priority. Trade credit insurance policies are customisable according to the needs of your particular business, meaning that you will only receive (and pay for) the cover that you need. The support and protection offered by credit insurers provides you with information on prospective clients that a small business might not have access to. As an added bonus, having credit insurance improves a business’ risk rating, leading to potential decrease in banking rates and higher liquidity.

3. It fits your business’ pocket

Due to the fact that your insurance policy will be customised according to your business needs, you will not be charged exorbitant prices for cover that you don’t need. Remember, the level of risk to your business determines the rate of your premium.

4. Access to inside information

When insurers conduct continuous risk assessment on buyers, they can also view how many other companies queried their financial status. If there are fewer queries into a customer’s credit status over time, the insurer knows that the customer is becoming an increased risk and subsequently alerts and advises you to discontinue trade with the customer.

5. Informed consultation

Credit insurers are constantly conducting research into various markets and can advise your business on upcoming opportunities, changes in legislations or advise you on growth or expansion processes. This helps you make informed decisions about the future of your business.

Making sure that your business is taken care of should your customers fail you, must be your top priority. It has become impossible for a small business to survive without trade credit insurance. Contact one of our consultants today to find out what your business needs!