Trade credit insurance safeguards businesses against the risk of non-payment of commercial debts. It covers your business-to-business accounts receivable. If you fail to receive payment due to a buyer's bankruptcy, insolvency, or other issues, or if the payment is significantly delayed, a trade credit insurance policy will compensate you for most of the outstanding debt. This protection helps you preserve your capital, maintain cash flow, and secure your earnings while offering competitive credit terms and accessing more favourable financing options.
With trade credit insurance, you can effectively manage commercial and political trade risks beyond your control. It provides the confidence to extend more credit to existing customers or to pursue new, larger customers that might have previously seemed too risky.
Trade credit insurance typically covers a range of risks associated with non-payment. These can include commercial risks such as insolvency, protracted default (when a customer fails to pay within a specified period), and political risks like currency inconvertibility, expropriation, and political violence that may prevent payment.
Additionally, some policies may offer coverage for pre-shipment risks, which protect against losses incurred if an order is cancelled before shipment due to the buyer's financial instability. It is essential to review the specific terms of a policy to understand the extent and limitations of coverage provided.
Trade credit insurance can provide numerous benefits for businesses. One of the most significant advantages is protection against bad debt, which can help maintain healthy cash flow and financial stability. This insurance also enables businesses to explore new markets and expand their customer base safely without fearing non-payment.
Furthermore, trade credit insurance can improve access to financing. Lenders often view insured receivables as lower risk, which can result in better financing terms and increased borrowing capacity. It also enhances credit management practices, as insurers often provide valuable insights and credit assessments of potential customers.
Cover Buddies is Malaysia's preferred commercial insurance provider and can help you obtain the most suitable coverage for your business. Contact us or request a call, and our professional consultants will contact you within 24 hours.