Trade Credit Insurance (or Debtor Insurance) is a tax-deductible way to cover your company against the impact of bad debt. It ensures you GET PAID – even if a customer goes broke or refuses to pay!
As brokers, we have a selection of Debtor Insurers to choose from. Therefore we can provide you with a variety of options and terms to achieve the most cost-effective Credit Insurance option for your business.
What does it cover?
The claim process starts as soon as you receive that dreaded letter from the Insolvency Practitioner. Up to 90% of the outstanding amount is paid within 30 days of receiving confirmation of your debt. This is much better than the 2 cents in the dollar dividend that is usually expected (if you receive anything at all!)
This is where the customer is not actually insolvent, but they are refusing to pay their debt. The Protracted Default period varies between Insurers and is generally 120-150 days from due date. You no longer have to write off these debts.
Policies can also be negotiated to cover:
- Pre-delivery risk (completed work that has not yet been invoiced)
- Work-in-progress (this is especially important if you are manufacturing goods which cannot be easily on-sold to someone else)
Export policies also cover Political Risk (including Contract Frustration, Export Restriction, Currency In-convertibility, and Expropriation) in overseas markets.
You may choose to cover all debtors, a specific group or major debtors.
Debtor Insurance – Benefits to your business
You are in business to make a profit, and bad debts erode your bottom line.
No longer does your ability to pay your suppliers need to be affected by a customer becoming insolvent or not paying.
Confidence to extend credit
You can increase your exposure to new or existing customers knowing the impact of bad debt has been significantly minimised.
Security to offer Financers/Suppliers
You improve your risk profile by implementing a Credit Insurance Policy. As a result, you might negotiate better finance terms or higher credit limits with suppliers.
Improve Shareholder returns
Credit Insurance allows you to lower your bad debt reserve. Consequently, earnings will improve, which benefits shareholder equity and financial ratios etc. Credit Insurance premiums are tax deductible (whereas your bad debt reserve is not).
Independent Credit Assessment
Throughout your policy, you can receive information about your customers to assist in managing your credit risk. The Insurer will confirm whether your customer is ‘credit-worthy’. They advise whether any adverse information becomes known. A customer’s payment history is not always an accurate predictor of its ability to pay.
Check out our Commercial Finance Page for all our commercial finance options.
Are you interested in getting paid and taking the worry out of your business? Give me a call to discuss your options. We will get you a quote to way up your options 02 9453 0300.