20 December 2018

How trade credit insurance provides stability in uncertain times

Trade credit insurance is more than a back-up for businesses that trade on credit terms. It also enables growth through expanding sales channels and volumes, making it a valuable strategic tool for increasing turnover and profitability.

According to the Australian Financial Security Authority, the number of Australian business insolvencies continues to rise under current economic conditions of reduced household spending and digital disruption. Any company that sells goods or provides services on credit terms is at risk of non-payment. Having a customer default on payment is beyond the control of even the most stringent credit control processes, but the impact on working capital can be mitigated.

Trade credit insurance cover is a practical measure for protecting business liquidity in the event of non-payment of accounts receivable by a key customer. The Gallagher trade credit policy is designed to respond quickly, with claims typically paid within 90 days, to enable businesses to maintain normal operations. This safeguards working capital while enabling businesses to offer competitive credit terms and grow their custom.

How it works

Policies are usually written on a 12 month renewable basis, but can be negotiated up to 36 months, for goods and services to approved customers during the period of tenure. Policies provide cover for 90% of amounts owing and premiums are generally priced at less than 0.3% of insured turnover. The cost is tax deductible.

Trade credit insurance covers

  • a business’s entire debtor ledger
  • nominated debtors only
  • domestic customers only
  • overseas customers only.

Benefits of trade credit insurance include

  • underwritten by Standard & Poor’s (S&P) A-rated insurance providers
  • provides securities to stakeholders such as financial institutions and shareholders
  • enables business growth
  • flexibility of coverage
  • protects profits
  • regulatory compliance for some industries (eg: wine exports)
  • competitive premiums
  • tax deductible.

The Gallagher difference

  • We act as business partners to our clients’ companies
  • Single point of contact, continuous service
  • We provide regularly updated business intelligence on debtors
  • Claims management actioned swiftly
  • Payouts made within the quarter

Want to find out more?

Click here to access Gallagher’s trade credit team for more information, a free of obligation quote or to extend your insurance cover.

Find out more about trade credit insurance