Who needs business credit-insurance?
Manufacturers, wholesalers/distributors and
service firms are excellent prospects for credit insurance. Any business
that has large accounts receivable from other businesses might benefit
from business credit insurance
Retailers
are not users of business credit insurance, since they sell to consumers and business credit insurance is
limited to commercial accounts.
Business credit insurance works especially well for businesses that:
-
Have large credit exposures spread over a few accounts.
-
Borrow against accounts receivables for cash
flow.
-
Have small profit margins (one loss could wipe out a
lot of sales efforts).
-
Have a disproportionate number of customers in a single
line of business.
-
Have a high percentage of customers in a single
geographical area.
-
Sell custom-made products (companies have
inventories reserved for specific customers)
-
Sell on extended terms in order to maintain
market share.
-
Desire third party expert credit guidance.
-
Desire to upgrade their over-all collateral for their lenders.
-
Want to add value and stability to their financial
statement.
-
Have a few accounts that, when combined, owe them more
than the business can afford to lose in case something unforeseen
caused multiple large failures.
-
Are in an industry that offers discounts for early
payment.
There are some industries that business credit insurance
works very well for because of industry standard procedures (unusual
terms of sale, competition, use of letter of credit, low profit margins,
etc.)
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