Credit insurance is a form of insurance that helps protect businesses from the consequences of unpaid customers. It is a guarantee that is of great importance to the life and smooth functioning of companies. It concerns all companies that provide goods and services. Find here the most important reasons why you should take out credit insurance for your company.
All companies are affected by credit insurance
Credit insurance is not mandatory, but it is highly recommended for all companies, regardless of their nature, size, legal status and field of activity. Whether you are a VSE, an SME or even a large multinational, it is important to buy this type of insurance to protect your business. It is a means of securing your business. This is especially important if you carry out commercial activities.
Regardless of the collection strategies you employ, there is always a risk of not being paid by some customers. Many companies accumulate unpaid invoices, which have serious consequences for their operations. These outstanding payments can lead companies to situations with insufficient resources to cover operating expenses.
Faced with missing payments, your business may find itself unable to pay salary and bonuses to its employees. It may even lack the funds to cover operating expenses (water bills, electricity, taxes, etc.). Lack of resources can also damage your image with your partners, especially your suppliers and investors. This may mean that you are no longer able to meet your obligations to them on time.
Unfortunately, these situations drive many companies into bankruptcy and accelerate their disappearance. Credit insurance helps prevent all these situations to guarantee a good function and a long life for the companies. The insurance company is responsible for collecting your invoices. He makes sure to chase up outstanding payments and recover the delivered invoices. He can also take care of the case management. In the event of non-payment, he will compensate you.
If you are a business promoter, it is important to try to understand credit insurance in order to take it out protect your business. This will allow you to not only offer longevity to your business, but also social security to your employees. The company’s bankruptcy may lead to the dismissal of the latter.
Credit insurance also gives you the opportunity to optimize your relationships with your partners, with whom you will have much more credibility. The same applies to your customer relations. Thanks to this guarantee, it will be easier for you to sell on credit and offer more flexible payment terms. Credit insurance can also facilitate your access to finance. It is sometimes an integral part of the conditions that certain structures require to give you a loan. Regardless of whether you are a start-up company or a company with many years of experience, it is important, even crucial, for you to take out this insurance.
There are generally two types. Domestic business credit insurance covers companies that sell their products or services exclusively on national territory. Foreign company credit insurance, on the other hand, is mainly intended for export companies. It gives them both commercial protection and political cover.
How to choose credit insurance for your company
There are many insurance companies that offer this type of guarantee to businesses. They generally offer a wide range of deals. It is therefore not easy to make a choice to protect your business. There are tips for identifying the offer that suits you best.
Consider your industry and your needs
Companies generally offer deals with a wide range of coverage. It is therefore important to take stock of your needs and the risks of non-payment to which you are exposed. This exercise prevents you from taking out an insurance policy that does not benefit you. In fact, all the guarantees that credit insurance offers are generally not necessary for all businesses. You will therefore take your needs into account in order to choose the offer that best covers them.
Compare the available quotes using a credit insurance comparator
The offers available are very different. It is therefore boring and unrealistic to try to compare them yourself. Online credit insurance comparators are designed to help you with this task. All you have to do is enter some data about your business into these search engines and they will offer you in record time the offers that best suit your needs and to the nature of your business. This facilitates the choice and allows you to consider all the consequences of your activity sector before taking out credit insurance. You can then make your choice with full knowledge of the facts.
Consider the cost of insurance
The price of insurance is undoubtedly one of the most decisive factors in your choice. It varies according to your sector of activity and your customers, the turnover achieved or the type of guarantee chosen. You must carefully evaluate the proposed costs in order to choose the company that offers a good price and at the same time best meets your needs. Above all, avoid companies that offer excessively low costs. They generally have a low reimbursement rate.
Consider the payout rate and limit
The repayment rate is an important factor that should guide your choice. The higher it is, the better you get to refund your customers’ outstanding payments. Among the offers that best meet your needs, you must choose the one that offers the best reimbursement rate.
The payout limit is also a parameter that needs to be investigated further. This is the amount above which you can no longer receive compensation from your insurance company. You must choose an offer that provides a high enough limit to cover all or a large part of your customers’ outstanding payments.
Check the repayment period
The repayment period can vary considerably from one insurance company to another. It varies from 1 to 6 months depending on the insurance company and the type of offer. To ensure financial stability permanent for your business, it is advisable to choose an offer that provides a relatively short repayment period.
The benefits of credit insurance
Credit insurance offers many benefits to businesses that subscribe to it. Here are some of them.
Get information about your customers’ default and insolvency risks
If you take out credit insurance, your insurance company will play a monitoring role with your customers. It will provide you with experts in financial risks. The latter will be responsible for assessing the individual customer’s financial situation. The results of this exercise will enable them to alert you to the risk of failure and insolvency of each individual client. You can then make an informed decision about whether to accept orders or provide credits. You therefore have the opportunity to make a good selection of your customers in order to reduce the risk of non-payment as much as possible.
Increasing your company’s financial capacity
By taking out credit insurance, you give confidence to your potential investors and partners. Insurance contracts generally contain a clause which ensures that the insurance company can indemnify. in case of non-payment. They therefore have more or less certainty that they will get the money back on time. In such a climate of trust, it will be easier for you to apply for and obtain financing. They will thus be an additional solution for you to boost your activities.
Improving your business performance
Taking out credit insurance helps to create a climate of trust in the company. Your employees who feel socially secure will give the best of themselves. Then you will be able to benefit from its full potential. All this will contribute to optimizing your company’s performance.
If you no longer have to worry about the risk of non-payment, you will be better focused on the activities of your business. You will be able to work in complete peace of mind to be much more effective and efficient.
The increase in turnover and the prosperity of the company’s activities
With the trust of your partners, it will be easy for you to open up to other markets. The development of new activities and the conquest of new customers will be easier for you. You can confidently validate new orders and satisfy your customers as quickly as possible. All this will lead to an increase in your turnover and provide good financial health to your business.
Improved collection rate
Being informed about the customer’s financial situation already allows you to select customers whose insolvency risk is low. In addition, it is the insurer who takes care of debt collection and in the event of non-payment, he must compensate you. It therefore creates a very efficient and effective recovery system to achieve a very high recovery rate. You therefore have a good chance of collecting all your bills.