Using Credit Insurance on Your International Receivables
When you purchase global credit insurance for your business, you are protecting both your domestic and international receivables from risks of non-payment. Of course, you want to offer your clients competitive-edge credit arrangements and terms. However, if even a few of your regular customers fail to meet their payment obligations, you may need additional funding to keep your business in good standing and full operation. With the instability of today's global economies, customers can suffer financial cutbacks or purchasing slowdowns. Some may file for bankruptcy. In addition, international clients may have problems due to currency devaluations or changing political situations.
What Common Risks Are Covered by Credit Insurance on International Receivables?
Frequently occurring risks involving international receivables are insolvencies such as bankruptcy and receivership as well as cash flow difficulties that often lead to protracted defaults. Balance sheet problems along with fluctuations in global economies, market demand and worldwide currencies can all contribute to risk factors. Wars and natural disasters can also have strong effects on overall risk levels concerning international receivables.
Additional political risks may include work stoppages and riots, countrywide revolutions, expropriations, embargoes and trade sanctions. Government-controlled regulatory changes involving importing and exporting of goods and services may also pose risks. For security from these and other serious situations and occurrences often detrimental to global sales and export or import of goods, your company should definitely have the ongoing protection of modern credit insurance. Only with the security of such insurance coverage can you be assured of continuous and strong business operations, well protected from threats of damaging risks.
How Is Receivables Credit insurance Helpful to International Sales and Profits?
There are several major ways in which credit insurance can be a strong aid for maintaining and increasing international sales and profits, including:
Increasing Sales and Profitability — When your company makes use of credit insurance to extend customer payment schedules and terms, you are enabling your buyers to purchase in larger quantities while still protecting your assets. Some clients may then make ongoing bulk product purchases. As you begin to ship and deliver larger product orders, it will become easier to obtain more attractive product prices from your manufacturers and suppliers. You can also decrease your inventory carrying expenditures.
Offering Competitive Credit Terms — With the security of a comprehensive accounts receivables credit insurance policy, you can provide impressive, highly competitive credit terms to your buyers and distributors. With attractive customer incentives, you can have more products constantly available in the supply line. With wider and more dynamic product visibility, your brand popularity will grow.
Creating New Market Opportunities — When you are able to extend enhanced credit terms to your clients with the aid of your global receivables credit insurance, your business can include new markets that were previously too risky. Your company can participate in commerce with exciting emerging economies and new industries in the world marketplace.
Strengthening Your Borrowing and Financing Capabilities — By having more international receivables within your company collateral due to your good credit insurance coverage, you can align more easily with your choice of lenders that fund on international receivables. You may even forge new relationships for your lender with emerging markets.
Fortifying Your Balance Sheet. – With reliable receivables credit insurance, you can strengthen your company balance sheet and add stability to your finances. Having such good coverage may even make it possible to substantially decrease your bad debt reserves.
The overall cost of international receivables credit insurance is relatively low—usually only a minor fraction of one percent of profits from your company's sales volumes. Without question, the price of your comprehensive credit insurance coverage will be extremely small in comparison to your rising profits from all the new global customers you will attain by offering them the enhanced credit terms your policy provides.