What is AR Insurance?
Trade credit insurance, also known as accounts receivable insurance, is a tool designed to protect businesses from risks including domestic and foreign customer insolvency, payment default, and political risks. This type of insurance is often used by capital equipment exporters and other firms that are heavily reliant on exports. Essentially, trade credit insures a company’s accounts receivable. Considering that accounts receivable is often a company’s largest asset, it is crucial to protect it. While it is important for companies to secure their business, trade credit insurance does so much more than simply mitigate risk.
What are the benefits of AR Insurance?
If used correctly, trade credit insurance can help companies expand sales, improve borrowing capabilities, and lower their cost of capital. Trade credit insurance is such a unique offering because it is the only insurance product that should pay for itself. As we enter into a new year, many companies are looking for different ways to meet or exceed goals and grow revenue. Trade credit insurance is a great strategy to satisfy these business needs.
How companies can leverage AR Insurance to Secure Attractive Payment Terms
One of the primary reasons that companies lose business to their competitors is not because their competitor has a superior product. Instead, it is because the competitors can offer more attractive payment terms to buyers. With trade credit insurance, companies can grow sales by offering more competitive terms without assuming additional risk and secure better borrowing capacity since the accounts receivable are insured. This allows companies to confidently expand their business to new buyers and new markets with reduced concern of non-payment.
The Bottom Line
Trade credit insurance is a unique tool which can help companies grow top line revenue and protect bottom line profits while improving bank credit facility options, pricing, and credit availability. As we embark on 2021, Impello Global wants to help you optimize products and offerings to grow your business and meet your goals. Keep an eye out for our next blog post that will dive into the process of acquiring trade credit insurance to reap the benefits for your business.