Accounts receivable insurance can be an extremely useful tool, but before jumping into the benefits of insuring accounts receivable, it is important to know what this coverage entails. Accounts receivable insurance, also referred to as trade credit insurance or A/R insurance, protects against customer insolvency, non-payment default, and bankruptcy. Essentially, if a client fails to pay what they owe, accounts receivable insurance will mitigate that risk and cover the losses for your business.
This sounds great, right? It is, especially when considering the amount of a company’s assets that are typically tied up in accounts receivable. On average, 40% of a company’s assets are uninsured accounts receivable. Since accounts receivable directly impacts a company’s cash flow and profitability, it can put a business at great risk by failing to insure one of their largest assets.
While one of the main purposes of accounts receivable insurance is risk mitigation, there are many additional benefits of insuring domestic accounts receivable. Check out other ways that investing in accounts receivable insurance is a safer, smarter way to conduct business.
Risk mitigation | Protect your business against customer insolvency, default, or bankruptcy.
Reduce concentration risk | Decreases risk for businesses that rely on certain customers or sectors.
Sales growth | By insuring accounts receivable, businesses can win customers by offering better financing terms.
Expand into new markets | Insuring accounts receivable gives companies the security needed to explore new markets while taking on less risk.
Better financing | Lenders often treat insured accounts receivable as a lower risk asset and as a result provide better loan terms and higher advance rates to companies who insure their accounts receivable.
Access to analytics | Many credit insurance companies conduct their own research on a business’s potential customers which can provide valuable insight.
Cash flow relief | Companies can maintain their cash flow even if a customer defaults by insuring accounts receivable.
Collection | Some insurers offer collection services to help collect overdue payments from both insured and uninsured buyers.
Whether you are considering investing in accounts receivable insurance or want to explore your options, we would welcome an opportunity to discuss how insuring your domestic receivables can help secure and grow your business.
Are you ready to grow and protect your business? Impello Global is a trade finance advisory boutique and trade credit and political risk insurance brokerage, with offices in Seattle, San Francisco, Boise, and Portland. 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 EXIM Bank programs and looking for guidance about how these programs 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.
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