Benefits of Trade Credit Insurance for Small Businesses

If you are into domestic and export trade, you might have heard people talking about the importance of trade credit insurance. Trade credit insurance benefits apply to large multinationals and small businesses. This post will focus on a few advantages of trade credit insurance for small businesses. Read on to learn more about how this type of insurance can help enhance your credit management processes.

Protects Your Cash Flow and Business

Most micro SMEs don’t have enough funds for their daily operations. Typically they use the revenue earned to re-invest. This implies that there could be a cash flow interruption when a debtor fails to pay.
Both minor and significant invoice balances can interfere with business development. Worse still, they can threaten its existence, especially if the management can’t secure funding from other sources.

Trade credit insurance offers cash flow relief when customers fail to pay for goods and services on time. The losses are indemnified by the insurer, thus allowing the business to maintain its cash flow. With trade credit insurance, entrepreneurs and other stakeholders don’t have to worry about the impact the risk of non-payment has on their cash flow.

Facilitate Financing

Banks and other lending institutions offer better credit limits and terms to businesses with trade credit insurance policies. This way, small businesses can easily compete with organisations with thousands of dollars in credit limits and 60-90 day credit terms.

Penetrate New Markets

Trade credit insurance can reduce the risks of working with new customers from developing countries. You can make this even better by taking out political risk insurance coverage, which makes it easy to do business in foreign countries.

Avoid the lengthy and Costly Debt Collection Processes

Debt collection can be ineffective and costly. As you try to sue your debtor for the unpaid invoices, legal fees can pile up. Trade credit insurance lifts the debt collection burden off your shoulders. If your customer defaults on the debt, your insurance company will pay you depending on your policy. Most insurance brokers will then take it upon themselves to acquire the unpaid debt.

It offers the Confidence of Knowing the Business is Protected

One of the most significant advantages trade credit insurance provides entrepreneurs is peace of mind. You will no longer have to worry about what could happen to your business in case of political unrest or multiple defaults. For this reason, trade credit insurance is a worthwhile investment every SME should consider.

How Niche Trade Credit Can Help

At Niche Trade credit, we have over 30 years of experience helping small businesses protect their investment with political risk insurance and trade credit insurance. If you own an SME in Australia and want to learn more about how we can help safeguard your business, call us at 02 9416 0670. We are always ready to offer a solution tailored to your unique circumstances.

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