One of the biggest concerns of a business owner is that their customers will not pay their debts. Customers hold the potential to either make or break a business, so it would only make sense for your business to mitigate that risk. But how does this work and what does it entail? Let’s take a look at the role of credit insurance.

When a business obtains credit insurance, it protects the business against non-payment from customers. This transfers the risk away from the business and over to an insurer, who covers the business should a customer become insolvent or default on their payments.

Some of the biggest benefits of having credit insurance include:

1. Protection against international risks

International politics might interfere with exporting goods. Consider this: your business exports goods to another country. Upon arrival of the goods, it is revealed that the country of receipt has amended their sanctions on importing and exporting of goods, rendering your customer legally unable to pay the money owed to your business. In a situation like this, political risk added to your credit insurance would mean that you are covered.

2. Additional service offerings to add value to your business

Besides taking care of your business in the difficult times, credit insurance providers can also act as a consultant to your business in the protection of your finances. Insurers can assist you with an in-depth credit check on a customer to set a realistic credit level for the customer. It has become a popular business practice to use a credit insurer to manage trade credit risk efficiently and effectively.

3. Keeping in time with the market

Credit insurers keep their fingers on the pulse of the market and notify you of any economic, social or political changes in the climate that may impact on your business. Your insurer should not only be able to provide you with a more comprehensive view of the market, but they should also be able to design the best deal for your business. With a better understanding of what the market comprises of, you are able to make informed decisions for your business and plan for growth.

4. Business growth

Once you have obtained growth in your business, you’ll realize that even this process has its own risks. New markets, products or customers bring additional risk to the business – it may stretch the business’ cash flow and weaken its ability to survive a loss.
When seeking business funding, lenders view credit insurance as favorable. In the event of a loss, the funds from the insurance claim are then transferred directly from the insurer to the funder, making it easier for your prospective backer to consider your business.

Today’s political, social and economic issues may plague your business when you least expect it and makes it even harder to prepare for the future. Make sure you have the necessary cover to help your business make it through the darkest of times!