It is a policy which pays you when your customers cannot or will not pay. This could be because their business has gone insolvent or they indefinitely delay payment.
As well as providing cover in the event of a bad debt, a credit insurance policy can also provide financial information on the credit worthiness of your customers, allowing you to make more informed trading decisions at the beginning and in the future.
Many insurers also have their own legal teams to help recover the debt.
We work with a range of clients from several sectors, including manufacturing, food and beverage, construction, logistics, financial institutions, wholesale and retail.
Companies within these sectors need Trade Credit insurance for many different reasons – they might be going through a period of growth, have previously incurred bad debts, have a concern over certain customers or an opportunity has arisen to increase exports in unfamiliar territories.
Trade Credit insurance is suitable for businesses with a turnover of more than R500,000 who offer credit to their customers
This information can be provided in the form of an insured credit limit that reflects their creditworthiness alongside insurers sharing their knowledge with their customers. In the circumstance that one of your customers is experiencing difficulties, they may also be able to provide valuable insights and market intelligence for you.
For smaller credit balances, insurers allow you to grant your own limits; either from a credit rating agency (for example, Experian, Creditsafe or Graydons) or based on your previous trading experience with the customer. This cover is known as a discretionary limit.
If the debt is due to insolvency then payments are usually received within 14 days subject to all information being received. If the debt is due to a customer refusing to pay, then there is a waiting period which varies from one insurer to the next but will be between three and six months.
The cost of the insurance is paid directly to the insurer (monthly or quarterly) on an interest-free basis.