9 Benefits of Trade Credit Insurance

Updated:
August 28, 2019

Accounts receivable are often a business' largest asset. If your customers are unable to pay what they owe, potential credit losses can present a substantial threat to your business. Trade credit insurance - also know as credit insurance or export credit insurance - is a form of insurance that transfers risk for businesses seeking to protect their accounts receivable against nonpayment.

Trade credit insurance policies are created to suit your needs and offer a number of important benefits:

Improved Sales

Businesses with trade credit insurance can boost their sales by offering customers and prospects more favourable credit terms, while eliminating the need for costly letters of credit.

Access to new market

Trade credit insurers offer protection against unique export risks by providing businesses with the market knowledge needed to make informed decisions in foreign markets.

Insolvency protection

In regards to sales made on credit terms, trade credit insurance protects organizations from the risk of a customer default or insolvency.

Cash flow relief

Trade credit insurance provides cash flow relief when a business' customers become insolvent or do not pay their bills on time. Losses can be indemnified, allowing the business to maintain its cash flow.

Reduce concentration risk

Trade credit insurance mitigates risks for businesses whose bottom line is dependent on a select number of customers.

Accounts receivable support

Trade credit insurers offer businesses access to professional trade credit analysts who can share best practices with a company's credit department.

Collection services

Trade credit insurance provides access to cost-effective collection services.

Facilitate bank financing

Banks will typically offer more favourable lending terms to businesses that insure their accounts receivable.

Portfolio monitoring

Trade credit insurance also provides access to professional portfolio monitors who track customers' ability to meet their financial obligations to the insured business.

FAQs

What is financial advising?

Financial advising involves providing guidance and advice to individuals, families, or businesses to help them make informed decisions about their financial matters. This can include various aspects such as investment planning, retirement planning, tax planning, estate planning, and more. Financial advisors analyze their clients' financial situations, goals, and risk tolerance to create customized strategies that align with their objectives.

Why is financial planning important?

Financial planning is crucial for several reasons:

Goal Achievement: It helps individuals set and achieve financial goals, whether they are short-term, such as buying a home, or long-term, like funding a comfortable retirement.

Risk Management: Financial planning addresses risks by considering insurance, emergency funds, and other protective measures.

Budgeting and Saving: It promotes responsible money management through budgeting and saving, fostering financial stability.

Wealth Building: Effective financial planning can lead to wealth accumulation and the creation of a secure financial future.

Can financial advisors help with debt?

Yes, financial advisors can help with debt management. They can assess your overall financial situation, create a budget, and develop strategies to pay down debt efficiently. They may also negotiate with creditors on your behalf, provide debt consolidation recommendations, and offer guidance on prioritizing and managing debt repayment.

What exactly does a financial advisor do?

The specific responsibilities of a financial advisor can vary, but generally, they:

  1. Conduct a thorough analysis of a client's financial situation, including income, expenses, assets, and liabilities.
  2. Develop personalized financial plans based on the client's goals, risk tolerance, and time horizon.
  3. Provide investment advice and portfolio management services.
  4. Offer guidance on retirement planning, estate planning, tax planning, and insurance.
  5. Monitor and adjust financial plans as needed based on changes in the client's life or market conditions.
  6. Educate clients on financial matters and empower them to make informed decisions.
What is the average fee for a financial advisor?

The fees charged by financial advisors can vary widely based on factors such as the advisor's experience, the services provided, and the region.

Common fee structures include:

Hourly Fees: Advisors charge an hourly rate for their services.
Flat or Fixed Fees: A set fee is charged for specific services or a comprehensive financial plan.
Asset-based Fees: Fees are a percentage of the assets under management (AUM).
Commission-based Fees: Advisors earn commissions on financial products they sell.
Combination of Fees: Advisors may use a combination of the above fee structures.
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It's important to discuss and clarify fee arrangements with a potential financial advisor before engaging in their services.