Many companies today face a growing challenge of how to finance their working capital when more and more of their assets are deemed ineligible by their bank. Receivables from foreign customers, customers with concentrations greater than 20%, or customers with payment terms greater than 90 days are commonly excluded from eligible collateral and thus are not available to support borrowing needs. This lack of eligible collateral can depress growth, limit expansion into new products or markets, and in extreme cases, can determine the fate of a company’s existence.
Because of these collateral limitations, a growing number of companies are discovering how trade credit insurance can help. While trade credit insurance is not a new product, most companies in the US are unaware of its benefits. Today, lenders are becoming more comfortable with the different trade credit insurance programs available and thus are generally willing to lend against insured assets that were previously deemed ineligible. Foreign receivables, concentrations, and extended payment terms are all common beneficiaries of insurance. Companies are also starting to insure short term domestic receivables to obtain a higher advance rate. It is not uncommon today to see advance rates on insured domestic and foreign receivables be as high as 90%.
Many companies are also preparing for a downturn in the economy. For most companies, the key to weathering an economic downturn is access to liquidity. Trade credit insurance can play a key role in this process and provide an avenue to liquidity that can help sustain a company through a turn in the economic cycle.
If you would like to learn more about trade credit insurance and discuss ways it may help finance your company’s working capital need, please reach out. We would be happy to learn about your business, as well as your current financing arrangements, and discuss ways trade credit insurance may benefit your company.
About Impello Global
Impello Global is a trade finance advisory boutique and trade credit and political risk insurance brokerage, headquartered in Seattle, Washington. We specialize in trade credit and political risk insurance and provide advisory services to companies and lenders who are looking to expand their trade finance capabilities.
If you are a company or a lender trying to better understand trade credit insurance or looking for guidance as to how trade credit insurance can help improve working capital financing, our team would be delighted to learn more about your business and discuss options available to you. Please visit our website at www.impelloglobal.com or contact us directly at info@impelloglobal.com.