Author: Colin Cunningham
Nearly 50% of all B2B transactions in the UK is offered on credit and recent statistics show 51% of B2B invoices are overdue, with 7% being bad debt1. This can place a growing concern on the financial health of a company, if payments are not received on time, or not at all.
With many businesses under significant pressure to manage increasing expenses and find growth opportunities, Trade Credit insurance can offer a vital safety net to help protect against the uncertainties of non-payment and bad debts. It can also support businesses in other ways with managing their budgets, future business plans and corporate governance obligations, benefitting both investors and stakeholders.
Enhanced cash flow stability
Maintaining a steady cash flow is essential for operational efficiency and strategic planning. Trade Credit insurance can ensure that receivables are protected, offering companies the confidence to plan and invest without concerns regarding the repercussions of unexpected financial disruptions.
Improved access to financing
Financial institutions may also view insured receivables favourably. When a business is found to have adequate protection against potential defaults on buyer payments, it enhances their creditworthiness. This can result in better access to financing and more favourable terms to support operations and the ability to seize opportunities with confidence.
Credit management support
As trade credit insurers track the financial health of companies, they can provide important, and early information and notifications on the likelihood of a customer default. This can assist a business to reduce exposure by avoiding further credit extensions to a particular supplier or buyer.
Facilitating growth and expansion
With Trade Credit insurance, companies can gain a competitive edge in the market by providing easier credit terms to their customers and entering new markets, knowing they are appropriately protected against potential debt repayment defaults. This could help to solidify new customer relationships and facilitate market expansion.
Protection from the domino effect
A single instance of non-payment can trigger a chain reaction, commonly known as the 'domino effect'. This occurs when the insolvency of one company raises the likelihood of other related companies, such as suppliers, debtors, and customers, to experience cash flow difficulties due to unpaid debts from the initial insolvency. This effect can be felt throughout the supply chain and take place over many years.
Partnering with Gallagher
Partnering with the right insurance broker will help equip your business with effective ways to manage credit risk. As one of the largest trade credit insurance brokers in the UK, we have a team of highly skilled and experienced specialists who understand the complexities of the market. With strong relationships with a wide range of reputable UK and global trade credit insurers, we can work with you to design a customised solution that aligns with your risk appetite and business objectives.
