Get informed, get protected, get your trade credit insured

Recently trade credit insurance has taken centre stage, hitting the headlines more than ever before. Turbulent times have highlighted the need for businesses to make sure they are trading safely and trade credit insurance is finally in the spotlight. “The best known retail chains rely on an ordinarily hidden but vital class of cover,” said the FT in an article on the subject recently. For more than 100 years, trade credit insurance has quietly continued to be the catalyst for business growth, enabling trade, researching and supporting business with new markets and helping to establish trade links throughout the world.

Despite recent media coverage to the contrary, trade credit insurers continue to do just that, continuing to cover hundreds of thousands of businesses around the globe, helping steer them away from adverse risks, recommending the good ones to stick with through turbulent times so that we will all be in a position to take advantage of the eventual upturn when it arrives. Our aim is to enable trade wherever we can, for as long as possible.

Recent weeks have shown just how global our economy is today. Not only can no market operate in isolation without knock-on effect, but also in that it is simply not enough for many businesses to transact business locally or even domestically. Survival, for many players, means looking for opportunities outside traditional comfort zones, expanding markets, looking for customers in new areas, whether in new industries or new territories. Doing so, however, increases in the level of exposure to risk. Cash sales would be ideal, but with competitors trading on credit terms, to stay competitive, businesses need to offer good payment terms as well. At the same time the buyers may be new and information about their creditworthiness may be difficult to access. If they decide not to pay, collecting on foreign receivables can be a long and painful endeavour. And as if that weren’t enough, the constantly changing external economic pressures, add a whole new raft of complexity.

The most essential requirement of conducting effective international business is the ability to determine with which companies you should and should not do business. Choose the winners and you win, pick the losers and you may go out of business before they do. The beauty of credit insurance is not just in knowing that someone is going to pay up if your debtors don’t. Smart businesses are in it for the intelligence. With information on literally hundreds of millions of businesses right around the globe, updated daily, the global trade credit insurers are in one of the most privileged positions in terms of business intelligence. We often know about the risks of dealing with a business before the business knows itself. And if you hold a trade credit policy against one of your purchasers, your insurer will flag up any problems or trade risks with that business so you can take appropriate action, perhaps suspending trade or not shipping goods you may not get paid for. Credit insurers with a larger global footprint are often in the best position to provide sellers with this information in a cost effective way.

Ultimately, although trade credit insurance has historically been viewed by many as a “nice to have”, and has recently faced criticism at the hands of a few commentators who don’t have a full understanding of what a trade credit policy does, for businesses looking to new marketplaces it continues to be a “must have”. Today, trade credit insurance is a critical part of the savvy business tool kit – in these troubled times, there are few effective alternatives when it comes to protecting against defaults stemming from commercial and political risk.