Use trade credit insurance to finance your business’ expansion in the new year
When running a business, there are certain inevitabilities you will encounter – from the incessant challenges surrounding your cash flow, non-payment from debtors, how to fund your goals for expansion and what may seem like a never-ending barrage of other day-to-day worries that consume a considerable amount of your time.
Therefore, when it comes to expanding your business, you need to understand how to position yourself to gain access to effective financing solutions that reduce, rather than compound the stress of running your business. Trade credit insurance is one such way that provides your business with enhanced financing mechanisms to help you realise your goals in 2018.
In 2018, consider taking on limitless horizons, with cover from Credit Guarantee that enables your business to expand into new markets and grow your turnover.
Entrepreneurs don’t see business financing the way lenders do and it’s costing them
According to a Wells Fargo national study of business owners, nearly one third of business owners have the most financial stress and are worried about meeting their financial obligations.1
In addition, many small businesses are stressed about cash flow, as they do not understand how banks assess them as credit risks. This limited understanding can be detrimental to businesses looking to secure funding.
Before approaching a lender, you need to understand some of the key factors lenders will use to evaluate your credit application:
- Credit history – the lender will look at how you have managed any previous credit. A history of good management will work in your favour;
- Ability to repay – here, the institution asks questions such as whether your business is profitable, and will look at if you have positive cash flow;
- Capital – do you as the business owner have enough investment of personal capital in the business? This level of investment could support your case as being a good risk;
- Business experience – do you have extensive experience operating in the industry;
- Collateral – as the business owner, do you, or does the business have assets that can be used as collateral to secure the investment. Lenders will always look at your ability to repay the loan, the lower this is, the lower the likelihood of being granted the loan you require;
- Trade credit insurance – have you covered your debtors’ books with trade credit insurance? By taking out trade credit insurance, you provide your business’ potential finance providers with added security.
Garnering a better understanding of the factors used to determine creditworthiness will assist you to develop a strong credit profile and thus give finance providers the added security they need to advance a loan.
Four benefits of trade credit insurance in securing a business loan
Many companies initially purchase trade credit insurance to protect capital, cash flow and earnings, however, this product allows them to safely and strategically source financing and expand their businesses, thereby increasing sales and profits.
- As most companies sell their products on trade credit terms, lenders need to know that this debt is secured should debtors default on their payments.
- With trade credit insurance, you may find it easier to get financing and attain cash flow relief.
- Trade credit insurance can also improve your company’s relationship with your lender.
- In some cases, banks and other lending institutions actually require trade credit insurance to approve your loan.
Whether you’re trading with established customers or are seeking new markets, you can use trade credit insurance to protect your cash flow and balance sheet against the unexpected shock of non-payment. Contact Credit Guarantee to get a personalised quote for your business and industry.
Protect your bottom line and cover your debtors’ book with trade credit insurance
According to Industry Week, accounts receivable can represent up to 40% of a company’s assets. While it is very encouraging and looks good in your company’s books, in today’s challenging economic environment, non-payment of any portion of any monies due to your business can become a serious financial and operational threat2.
A debtor could default on a payment at any time and you need to be prepared. There are a vast number of underlying reasons that could cause a default – from the economy, exchange rate fluctuations, political upheaval including terrorism, governmental changes and even the rapid rate of technological change. All these can quickly change a customer’s risk profile and ability to pay invoices.
What seemed like a stable business environment one day can become disarray the next. Your credit insurance policy secures one of your most valuable assets. Fortunately, trade credit insurance from Credit Guarantee is a proven solution to protect a business from potential accounts receivable losses, develop new markets and even help expand sales.
Credit Guarantee is licensed financial services provider.