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INSURANCE SERVICES

We work with our clients to understand their underlying motivation for obtaining insurance and make sure each policy is structured to their specific needs.

TRADE CREDIT INSURANCE

What Is Accounts Receivable Insurance?


Part of your business efforts goes into managing your accounts receivable department effectively. Why? If the money is outside, it isn't helping your business to grow. In addition, the longer a debt remains unpaid, the higher the chances of the debt becoming bad (unrecoverable). Debtors can default for many reasons:

  • Closing the business or going bankrupt (only a measly 25 percent of businesses live to see their 15th birthday)
  • Death or illness
  • Skipping out/running away
  • Cash flow problems - they can’t afford to pay
Accounts receivable insurance helps you hedge the risk of your accounts receivable ledger. As insurance brokers, we help secure coverage to cushion you against losses if you’re unable to collect from certain debtors.




Why Should I Care About Insuring My Accounts Receivable?


When you can’t collect payments from a customer, you absorb the loss yourself, which impacts your bottom line. Consider these accounts receivable statistics from a 2018 report:

  1. ​Over 64% of businesses said their overdue invoices increased from 2017
  2. 90% reported late payments, especially by B2B clients
  3. Debtors now take an average of 61 days to clear invoices, up from 63 days in 2017. Average payment terms are 31 days, up from 27 days in 2017
  4. 49.6% of debtors did not pay on time for lack of funds
  5. Businesses reported 1.8% of their accounts receivable uncollectable, i.e. bad debts
Will you refuse to extend credit because of this? Probably not, because that will reduce your sales significantly. This is where accounts receivable insurance comes in. By insuring your accounts receivable, you are able to offer credit sales to customers without worrying about whether or not you will be paid.




How Will Accounts Receivable Insurance Improve My Business?


Apart from protecting your business from losses associated with bad debt, accounts receivable insurance can do the following:

  1. Empower you to borrow using your AR ledger as collateral. With coverage, lenders can give you up to 90 percent of your total domestic and foreign ARs
  2. Improve your balance sheet because you can reduce your allowance for bad debts - which increases your earnings
  3. Offer customers better credit and payment terms to increase your revenue without increasing your risk
  4. Service large credit orders that would cripple the business if they went unpaid
You can get these and many more benefits tailored to your exact business needs. As a bonus, our team can help you streamline your AR ledger by advising on credit terms and collection strategies.




When Should I Buy Accounts Receivable Insurance?


Accounts receivable insurance can help you in the following circumstances:

  • Mitigate the risk of non-payment due to protracted default, insolvency, losses due to political risk, etc.
  • Help to grow business with new clients without taking on excessive new risks with unknown payment history
  • To help improve collateral quality which in turn will entice lenders to provide higher advance rates and more favorable terms to finance short term working capital needs
  • Reduce concentration risks to individual customers or country concentrations





Trade credit insurance, also known as accounts receivable insurance, is a risk management tool that protects against domestic and foreign customer insolvency, protracted default and political risks such as currency inconvertibility, expropriation, and nationalization. In addition to risk management, companies use trade credit insurance to improve their borrowing capabilities, increase their sales revenue, and negotiate better purchase agreements with their suppliers.

If you are considering trade credit insurance for your business or just looking to better understand the different options available, we would welcome an opportunity to talk with you.  We work with our clients to understand their underlying motivation for obtaining insurance and make sure each policy is specifically structured to each of our clients needs.

Contact us today to find out how we can help you secure one of, if not, the most significant assets your business has.

To read more: Trade Credit Insurance

TRADE CREDIT POLICY TYPES

Single Buyer Insurance


An insurance policy underwritten to cover sales to a single buyer. In many cases, this coverage is sought after due to the insured obtaining a new client or expanding sales to an existing client under terms which are more aggressive than prior trading history. This coverage is primarily available through EXIM Bank and a select number of private insurers. Given the risk is concentrated in a single account debtor, coverage tends to be more restricted and harder to obtain. Talk with us today about your insurance needs. We would love to learn more about your business and help you find the right solution.




Key Account Insurance


Key account insurance is intended to cover a specific segment of clients, other than credit quality. For example, companies often look to insure their top 5 or 10 customers, or may want to insure all sales in a specific geography. Other examples of when a key account policy makes sense is when a company factors or sells select customer receivables and the factor or buyer of the receivables requires insurance. Talk with us today about your insurance needs. We would love to learn more about your business and find ways to help you finance your growth.




Multi-Buyer Insurance


Much like the opposite of Key Account insurance, some clients choose to insure all receivables, except a specific segment, which is often referred to as a multi-buyer policy. Examples of this would be insuring all foreign receivables except Canadian receivables. Policies insuring all domestic receivables, all foreign receivables or both domestic and foreign are also referred to as multi-buyer insurance policies. In addition to risk mitigation, multi-buyer insurance policies are often used to improve a company's access to working capital financing. Lenders often limit collateral eligibility for receivables that have concentration risks, longer payment terms, or that are payable from foreign account debtors. By insuring those receivables, lenders will often include them as eligible collateral, and therefore, improve the company's access to working capital financing. Whether you are looking to insure against a default by one of your clients or to improve your company's access to working capital financing - or both, we would be delighted to help you find the right solution.




Medium Term Insurance


Medium term insurance is a more specialized insurance coverage, primarily intended for capital equipment sales. Generally, the coverage period will range from one - five years, with exceptions up to seven years for specific types of capital equipment. In most cases, these policies are written on a single buyer basis, require some form of down payment with a prearranged payment schedule and are documented with a promissory note. The majority of medium term insurance policies are structured to include a bank as a funding source. Therefore, the ability to understand the banking requirements is critical for these programs to be successful. Our team has spent the past 15 years actively structuring, insuring, and funding medium term transactions. We would welcome an opportunity to learn more about your business and help you structure and implement a successful medium term program.





POLITICAL RISK INSURANCE

Political risk insurance insures against losses caused by expropriation or confiscations, currency inconvertibility, political violence, and governmental contract frustrations. Political risk coverage is generally included in the typical trade credit insurance policy; however, political risk coverage can be purchased specifically for government contracts and is very commonly used for overseas expansions to protect the value of acquired business assets.

Talk with us today about your political risk insurance needs.  We would love to learn more about your business and help you find the right solution.

    Want to learn more? Contact us

    Phone: 206.414.8460

    Email: info@impelloglobal.com

    Impello Global

    Phone: 206.414.8460
    Email: info@impelloglobal.com

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