As an entrepreneur, you invest in building your business—in places, people, equipment, technology, and ideas. Having the right insurance supports what you’ve built by protecting those assets against unexpected disruptions. Yet, surprisingly, one of your business’s most considerable balance sheet assets—your accounts receivable portfolio—is often left uninsured, despite representing up to 40% (or more) of your asset base.
Accounts receivable portfolios are built on trust, meaning a client promises to pay for a product at a future date in exchange for a product delivered today. However, if that client takes your goods without paying upfront, you face the risk of non-payment in the future. This can have a negative impact on your business, as just one late payment or customer insolvency can put stress on your cash flow and profitability. That’s where Trade Credit insurance can help by protecting your accounts receivable against non-payment.
Trade Credit insurance—also known as Accounts Receivable insurance—is a form of insurance that helps mitigate financial risk for businesses, in addition to political risk when selling to foreign markets.
Beyond protecting your business’s accounts receivable, other benefits to purchasing a Trade Credit policy include:
- Cash flow enhancement—Insured losses can be indemnified in the event of bankruptcy within 30 days of claims submission. Given the time it takes for a settlement by a trustee, this enables you to better manage cash flow
- Improved bank margining—Bank margining against your accounts receivable assets can often be increased from 75%- 90% by credit enhancing them with an insurance policy
- Support concentration risk—Mitigates risks for businesses that are dependent on a select number of customers
- Accounts receivable support—Offers you access to professional Trade Credit analysts who can share buyer, industry, and country intelligence, and best practices
- Improved sales—Boosts sales opportunities by offering clients and prospects more favourable credit terms, while possibly eliminating the need for costly letters of credit
- Access to new markets—Support business growth by giving you the market knowledge needed to make informed decisions in foreign markets
- Peace of mind – Gives comfort that your business is not negatively affected by another business’s bad decisions
While there are standard policies that are helpful for small and medium-sized enterprises, Trade Credit is a dynamic business product. A specialist broker can structure a customized policy to meet a client’s specific requirements.
Some different policy options include:
- Canadian buyers only
- Top accounts
- Canadian and U.S. buyers only
- Exclusion of top accounts
- Export buyers only
- Excess of loss
- Whole turnover
- Single buyer
With access to all Trade Credit insurers in the Canadian market, we leverage our expertise in Trade Credit insurance to navigate the marketplace on your behalf. As a proud member of the International Credit Brokers Alliance (ICBA), Cowan Insurance Group can meet the needs of multinational corporations because of its global Trade Credit insurance reach and local market support.
While it is a cost-effective option for businesses, the cost of a Trade Credit insurance policy doesn’t reflect its value. The real value—and our promise—comes when you find an insurance partner that takes the time to understand your needs, from a cost and policy structure perspective and ensures that approach matches your business requirements. As a leading independent, Canadian-owned insurance brokerage, we have an experienced team who develop tailored solutions and provide ongoing support for our clients.