Trade credit insurance is a simple and effective way to manage your credit risk

You may have already heard of trade credit insurance but don’t know much about it. Or you may be completely unfamiliar with it and are thinking “that sounds complex and daunting”. The Channel Partnership translates credit insurance into your language and helps explain how, when implemented well, it means better management of your business’ trade credit risk.

In layperson’s terms, trade credit insurance protects businesses like yours against the risk of loss of revenue if:

your customer or client owes you money for products or services you have provided, and
they cannot pay their debts.

This could happen for many reasons: such as a company defaulting because of poor cash flow, becoming insolvent, or going bankrupt. When you take out a trade credit insurance policy, you can insure your accounts receivable (debtors) against the risk that a customer will be unable to pay.

Trade credit insurance can also be referred to as debtor insurance, debtor protection, bad debt insurance, export credit insurance and accounts receivable insurance. We think that trade credit insurance keeps it simple.

Underlying company insolvencies reached their highest annual level for 6 years primarily driven by creditors’ voluntary liquidations.

Insolvencies chart

Source: The Insolvency Service

Reducing your business’ credit risk

You may be thinking, “oh, that won’t happen to my customers” – but it’s important to remember that with an ever changing economic and political climate, company insolvencies can happen at any time.

Think of it like this: if you bought a house in a flood-risk area, then you’d consider taking out an insurance policy to protect yourself against flood. You may even think it’s a good idea to insure against flooding BEFORE it happens. Then why not do the same for your debtor ledger? There is always an element of risk in offering credit to any customer. It’s wise to be wary, and trade credit insurance provides the perfect financial safety net for your business.

Credit insurance companies offer a variety of trade credit insurance contracts with hundreds of variations or endorsements available to meet the requirements of almost any type of business. Our approach at The Channel Partnership is to understand your business and explain to you the different options that the market has to offer. We believe you will only want to know about the handful of variations that are relevant to your business.

Every company is different and you’ll probably have a specific concern, or just need some sensible advice. We can help work out where your risk really lies, and propose the best solution from all those available in the market.

We know that credit insurance doesn’t work for every business. The way you trade may not fit the cover provided. Your customer base may fall outside the scope of what the credit insurers will cover. Or you may simply feel that the best the market can offer, no matter how good, still doesn’t measure up as value for money in your eyes. At The Channel Partnership, we’re not trying to sell you a credit insurance policy. We aim to provide the best information so you can make an informed decision about what’s right for your business. Credit insurance needs to reflect your assessment of trade credit risk however you perceive it.

We’re doing things differently

We at The Channel Partnership don’t believe in generic policies or off-the-shelf solutions. We understand that every business is unique and that every credit insurance policy needs also to be unique to your business. It might only be in the detail, but The Channel Partnership is a details business!

So we have a culture and values where we like to do things a little differently – which adds up to a big difference.

See ‘Why choose The Channel Partnership?’ page to find out more.

Trade credit insurance protects your business against the risk of bad debts. But wait – it does so much more!

We work with owner-managed SMEs like you to help you gain maximum return on the cash you invest in your trade debtors. Trade credit is essentially the oil in the wheels of B2B trade. Good management of your trade credit risk is a key challenge but also an opportunity.

Trade credit insurance also:

supports “best practice” credit risk management processes and procedures
helps improve your business reputation and stability
frees up cash from bad debt reserves that can be put to better commercial use elsewhere in your business

Sounds great, right?

Here are some benefits in a bit more detail which we think makes taking out a ‘good’ credit insurance policy a no-brainer.

Increased profitability & growth. Not only does a credit insurance policy protect you against the risks of non-payment, it can also release vital reserves, previously used to safeguard against bad debts, which means more money for reinvestment. As an added bonus, the advice and support that you receive with your policy will help you to make informed decisions about the customers you work with, so you can avoid any dodgy characters. The security of credit insurance may also allow you to bid for bigger contracts and allow higher levels of credit more quickly.

Improved insights & risk management. Credit insurers have access to information not in the public domain so that levels of credit insurance reflect real time risk. This isn’t just about preventing you from working with businesses that have poor credit ratings – it’s also about ensuring you extend appropriate credit to each of your customers, and will help you to identify new customers to pursue as well as potential markets you can expand into.

More favourable finance terms. Credit insurance guarantees that your insured debts will be paid, even if your customer is insolvent. It will also support any applications that you make to finance facilities (including banks for expansion loans) or invoice finance and factoring companies. The extra security of a credit insurance policy should mean that you more likely to be accepted, and that the credit terms should be more competitive.

Better payment terms with your customers. Your policy can grant access to a credit control team and experienced debt collectors, improving the frequency of customer payments. This means faster payments from traditionally slow payers, giving you more cash within the business at any one time. Ideal.

What if I can’t afford trade credit insurance?

You may be thinking that these benefits are all very well and good – but your business simply can’t afford to take out a trade credit insurance policy.

Before dismissing the idea entirely, you should be thinking about:

How much of a negative impact a client failing to pay will have on your business.
Your clients’ stability, both as an individual business and as part of the industries they work in.
Any growth plans or expansion within your business.

Of course, you don’t have to be affected by all of these factors to warrant investing in a trade credit insurance policy. It’s important that you take the time to think about how your business will be affected if a buyer fails to pay – and whether you want to run the risk of this potential situation having a detrimental effect on the future of your business.

Our role is to get you best protection for the best value. You may be surprised what The Channel Partnership can offer.

While we have no known connection to Julie Andrews, here at The Channel Partnership we believe in getting to know our customer. Above all, please don’t think we simply ‘offer’ trade credit insurance. Our service goes beyond that – even if you choose not to work with us at the end of the day.

We bring a human side to business protection, and by sharing our knowledge we’ll help you to flourish and grow. That’s why we’re the UK’s leading specialist credit insurance broker.

It’s important to us that you make well-informed business decisions to get your business exactly where you want it to be. Which is why we will partner with you, work to understand your business and help you to identify the areas of risk and concern, before developing a bespoke insurance policy that actually meets your needs – for the same premium as an ‘off-the-shelf’ alternative.

It’s a bit like a custom-made suit – measuring and tailoring to ensure the perfect fit for your business. Or, if we think that credit insurance isn’t suitable for your business, then we’ll be honest and take the time to explain why we think this is and detail alternative options – we think it’s the right thing to do.

We value our people who are the backbone to what we do, and this is reflected in the service that we provide to our customers.

Finding the perfect fit

We understand that picking an insurer most suitable for your area of the market and business needs isn’t easy – which is why we have a specialist team that can provide advice and identify the best match for you (as well as the best form of cover for your business). This will depend on the type of trade you do, the weighting or spread of business with your customers, your current credit terms, and the areas where you are most at risk.

You may be thinking, “that’s all very well, but what about their credentials?” Well, we’ve been creating policies since 1992 and have been a recognised Investor in People since 2004. We’re also authorised and regulated by the Financial Conduct Authority no. 300035.

If you’re not already convinced, here are some key reasons why we think you should choose us.

We believe in partnership before profit. That’s why clients stick with us year in, year out.
We invest time in our clients, because we’re passionate about finding the best path forward for your business.
We give every company we speak with the same level of service – even if our products are not for you.
Everything we do is honest, transparent and adds value, helping you to make well-informed business decisions.

Or in the words of Julie Andrews, “Getting to like you, getting to hope you like me.”

We hope that you like what you read, and really look forward to working with you – get in touch with us today. In the meantime, we’re off to make a cuppa.

Want to know more?

It all starts with a conversation – whether that’s a phone call, a Skype call or a meeting over a cup of tea. No prizes for guessing that a meeting is our preferred option. It’s the quickest way for you to get the information you need. We’re confident you’ll find it worthwhile – even if our advice is that we may not be the best solution for you.

Can you spare the time for a cuppa?

Of course, there’s no obligation. Please fill in this form or just give us a call on 01275 817320.

What is Trade Credit Insurance?