Trade Credit Insurance: Protect Your Cash Flow With Flexport Insurance Solutions’ Newest Offering
Of all the types of business-related insurance out there, one every B2B needs to know about is Trade Credit Insurance (TCI)—which covers your accounts receivable in the event of a customer being unable to pay.
TCI: What is Trade Credit Insurance?
A TCI policy covers unpaid credit balances from sales made to your B2B customers, typically up to 90% of the unpaid balance. Whether you choose to protect your domestic or export business, you are able to minimize the risks associated with a customer’s insolvency or delayed payment.
TCI is a powerful financial tool designed to protect B2B merchants from the risks associated with providing their goods on credit terms. It safeguards you from the potential impact should a customer be unable to pay for a variety of reasons including: insolvency and protracted default.
TCI carriers use a network of data on millions of private and public companies all across the world to evaluate credit risks. This information can assist our clients to sustainably grow new business, accelerate the credit process, and reduce both concentration and market risks.
TCI: How And When It Works For You
In general, a company that buys TCI insures all or a majority of its accounts receivable — a policy can cover domestic, export, or both types of sales. Should a customer become insolvent or otherwise financially unable to pay their outstanding balance, you become eligible to file a claim to be indemnified for that loss of income. There are a number of specific use cases where TCI can be helpful, including, but not limited to:
Cash flow vulnerability
Entrepreneurs often have limited resources to absorb losses due to non-payment by a customer that would freeze your ability to continue shipping. TCI can protect your cash flow by ensuring you receive payment even if a customer defaults.
Reduce business risk
For younger companies, or those with a smaller niche customer base, bad debts due to customer non-payments can lead to significant financial strain. TCI can mitigate this risk by providing a mechanism to offset such a concentrated reliance on a single customer.
When a B2B merchant starts exporting products to international markets, there are unfamiliar economic and regulatory environments to be navigated. TCI can mitigate risks associated with non-payment even across international borders.
TCI: How it Can Help Your Business
Trade credit insurance brings peace of mind to B2B merchants. That peace of mind enables sustainable growth of both existing and new business, streamlining and unlocking the ability to extend credit terms to buyers knowing your cash flow is protected. TCI can also bring you the ability to receive more favorable borrowing terms from banking agreements, obtain critical information about your current and new customers, and secure easy access to collection services should they become necessary.
TCI: A Summary of Benefits
- Avoid financial risk by protecting accounts receivable from non-payment.
- Grow existing and new business sustainably with accelerated credit evaluation and deal closing.
- Likely receive better borrowing terms from banking agreements since banks look favorably on TCI as it reduces concentration and default risk.
- Obtain critical information about current/new customers that allows you to make better decisions about when to extend credit and at what limits.
- Gain easy access to collection services, which are built into most policies. In the event of a loss the trade credit insurance company can attempt to collect on the past-due.
- Streamline credit practices with an online platform to request new, or manage existing, credit limits.
Insurance is offered through Flexport Insurance Solutions, LLC ("FIS"), a licensed insurance producer (Illinois License No. 3001047128, California License No. 6001029). Insurance is not available in all countries. Check with a licensed FIS representative for availability.
For term coverage, FIS acts as an insurance broker and seeks quotes from multiple insurance carriers with A.M. Best ratings of “A” or higher who actually underwrite and issue coverage. Per shipment coverage is underwritten and issued by Navigators Insurance Company.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.
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