If you are looking at funding options and wish to maximise the value of your debtor book as security for a factor or bank, Trade Credit Insurance could be the solution.
Most factors and receivables funders will increase the valuation of the sales ledger as security if it is supported by Trade Credit Insurance, and you should be able to negotiate a better lending rate with your funder.
Some factors also offer their own in-house bad debt protection schemes to cover their clients against customer insolvency and non payment when using a funding facility. It may sound the same as Credit Insurance but there are a number of significant differences that can mean bad debt protection isn’t always the all-in-one solution it is made out to be.
One major difference is cost in the sense of how the premium/fee is charged on the turnover. Bad debt protection will charge premium for the gross turnover including VAT, whereas Credit Insurance only ever charges on the turnover net of VAT. That means that bad debt protection fees are paid on 20% more turnover than credit insurance – after all most companies charging VAT can claim it back in the normal course of business so why pay premium on it?
Secondly, as a Broker we re-market all our polices every year to ensure our clients have the maximum cover at the most competitive rates, this is a service that the funders can’t provide as they are restricted to their one in–house offering. This restrictive offering also means that the bad debt protection doesn’t always fit every company’s requirements. The Credit Insurance market is far more adaptable with options such as discretionary limit facilities and specific endorsements for industries such as construction, recruitment, advertising and many more.