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Philosophy: Trade Credit Insurance for SMEs

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Hi friends, 

If your business supplies goods or services on a credit basis you’re open to the risk of the buyer not paying, which means you’re probably already familiar with bad debts.

Bad debts can be detrimental by disrupting your cashflow, weakening your balance sheet and can ultimately take management time away from your business.

When speaking to business owners I find there are always concerns around the issues of non-payment.

Trade credit insurance is generally deemed as being too expensive and a complicated product that is unnecessary for small to medium enterprises (SME). However, if you run a SME and one of your largest clients fail to pay, having credit insurance could be the difference between your business still trading and insolvency.

To put it into perspective, take the following example:

At a 10% profit margin

A loss of $100,000 = $1,000,000 in lost revenue

Due to the huge risks of incurring a large bad debt there are simple and low-cost credit insurance facilities aimed at protecting SME’s who earn a revenue of less than $50 million. These credit insurance solutions are designed to give you the following benefits:

  • Protects your receivables against bad debt
  • Preserves your profit (roughly 40% of a business’s assets are from debtors ledger)
  • Protects your cash flow
  • Have the confidence to expand your business
  • Add security – trade credit insurance is recognised by banks and shareholders are also reassured that their assets are protected.

Although credit insurance may seem expensive it can save businesses in unforeseen circumstances which is why it’s applicable for all sized businesses and market sectors.

To find out more on the many facilities available contact your Ledge Finance Executive today or simply contact our offices here.



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