BIC - Trade Credit Insurance

Understanding Trade Credit Insurance in Australia

As a business owner, you have to be constantly looking for ways to protect your business and finances, and minimise risks. One way you can do this is by getting trade credit insurance

Trade credit insurance protects businesses from risks associated with selling goods and services on credit. It is an important tool to help with risk management while allowing companies to expand their customer base and extend credit terms confidently. 

Let’s take a closer look at what trade credit insurance is and how it can help businesses in Australia. 

What is Trade Credit Insurance? 

Trade credit insurance is a type of policy that helps protect companies against losses incurred when customers don’t pay their bills on time or go out of business altogether. It acts as a risk management tool that can help protect companies from bad debt and financial losses, which will help protect your cash flow.

It covers the receivables owed to businesses if they were not able to get paid, allowing them to focus on other aspects of their business operations without worrying about unpaid invoices or debts. 

All businesses that sell goods and services on credit terms, such as 30 days to pay, should invest in trade credit insurance, this includes domestic and international trade.

The Benefits of Trade Credit Insurance in Australia 

There are several benefits of getting trade credit insurance for your business in Australia. 

For example, it allows you to expand your customer base by offering more extended payment terms without having to worry about increased risk exposure. It also helps you manage cash flow by allowing you access to funds that would otherwise be locked up in unpaid receivables due to late payments or non-payments from customers. 

Finally, trade credit insurance can also help boost your company’s reputation by showing potential customers that you have taken the necessary steps to ensure their financial security when doing business with you. 

This can be a great way for small businesses in particular to stand out from the competition and gain trust among customers looking for reliable vendors who take their financial security seriously. 

How Does Trade Credit Insurance Work? 

The process of setting up trade credit insurance begins with an assessment of your business’s accounts credit portfolio. This helps the insurer or insurance broker identify potential risks and determine whether they can offer you coverage. 

Once an agreement has been reached, the insurer will then cover up to a certain percentage of any outstanding payments if something happens to your customer’s finances and they cannot or fail to pay their bills. The insurer will then pursue legal action against the customer in order to recoup any losses incurred because of their nonpayment. 

Who Can Benefit from Trade Credit Insurance? 

Trade credit insurance can be beneficial for businesses of all sizes, from small startups to large corporations. 

It’s especially useful for companies that rely heavily on accounts receivable income as their primary source of revenue – such as wholesalers, manufacturers, distributors, retailers, service providers and more – as it provides them with additional security in case one of their customers fails to pay their invoice or goes bankrupt. 

Additionally, it can also help boost confidence among lenders who may be reluctant to provide financing without seeing some sort of protection in place first. 

Trade credit insurance is an important tool for businesses looking for ways to protect themselves from risks associated with selling goods and services on credit. It can help minimise debt risks while also giving companies access to funds that would otherwise be locked up due to late payments or non-payments from customers. 

How Can I Get Trade Credit Insurance?

Trade credit insurance provides assurance and peace of mind knowing that your business is protected against potential losses due to customer insolvency or slow payments, helping boost the reputation of your company among potential clients as well as current ones.

Of course, all businesses should weigh up the costs and benefits before deciding whether or not this type of coverage is right for them but having an understanding of how it works can be hugely beneficial when making these decisions. 

To learn more about how trade credit insurance could benefit your business in Australia contact Business Insurance Consulting today. Our dedicated team will be happy to discuss your needs further and give you advice tailored specifically for your business’s needs!


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