Phillip Krinker

How Credit Insurance can help fund your business?

14th May 2018 Phillip Krinker 0 Comments

With the arrival of 2018, many companies are starting to see a light at the end of the tunnel in the midst of a frustrating financial scenario that 2017 left behind.    

Alternatives like the acquisition of Credit Insurance can be more than just loss preventive, and operate towards growth in several companies. Understand how from our today’s post!  

Credit Insurance: more than just protection for receivables

The main objective of contracting Credit Insurance for your company is to avoid losses from non-payment of credit sales invoices. Default on receivables causes losses and the resulting lack of financial resources can affect the company’s ability to maintain its normal level of business.  

Also, Credit Insurance can help your company to be more profitable by increasing the number of sales:  

  1. Increase in sales to ‘existing customers’: To expand sales to existing customers, without necessarily increasing the credit risk due to the “transfer of the credit risk to a leading insurer”, is the fastest way to increase your revenues.
  2. Increase in sales to ‘new customers’: It is a responsible and careful manner to increase your revenue.  To enter new markets or acquire new customers always poses a greater credit risk as the respective payment histories are not known.  When placing Credit Insurance for new customers, the insured may count on a prior due diligence on the debtors conducted by the insurer. That is very important when new customers are located in a Brazilian State other than that of the Insured.  The same rule applies to Insureds who wish to participate in exports to new customers and new countries. It should be pointed out that Credit Insurance usually includes “friendly” and “judicial” collection services, which are great benefits in the case of foreign countries having collection rules different to those we are cognizant of here in Brazil. As a matter of fact, the Insured receives its indemnity quickly (as per deadlines specified in the policy), subrogates the Insurer to all its rights. Debt collection is a responsibility of the Insurer.   

However, in addition to the foregoing, did you know that the protection provided by Credit Insurance can be used as an additional guarantee to support a receivables financing program with rates that are more attractive for your company?

Receivables may correspond up to 40% of a company’s total assets.   Therefore, correct management of receivables may bring many financial benefits for the growth of your business. Such as, for instance:

– You protect your company against the insolvency risk;    

– Significantly increased credibility with banks and access to financing;    

– Enables safe expansion of your company’s sales;

– Increases liquidity, since the company’s receivables account is guaranteed;

– Recovers the financial flow, through the indemnities received for default losses;    

– Constantly improves the credit analysis mechanisms and collection management;

– Greater flexibility, and frequently a lower cost when compared to other default risk reduction mechanisms;   

– Reduction in the rates charged by banks for advance on receivables;     

– Depending on the formatting and/or structuring of the operation, it may be possible to perform operations on the basis of “non-recourse” and “off balance sheet”;   

– The company limits its default losses to a previously known amount;

– The insurance cover may favor the company’s commercial policy planning.

CredRisk offers flexible solutions that provide a high level of autonomy for the granting of credit to customers, and generate sales conditions that are more competitive, and favor liquidity and the success of your company.   Learn more about Credit Insurance!