There are few things as annoying in business than the elation of winning some work, the pride of delivering your product to your customer and then the growing frustration as you realise that your customer may not actually pay you.
As the pandemic has shown some businesses to have far more resilience than others, the days of trusting your ‘gut’ before granting trade credit to potential customers has become far riskier. Industry reports that the volume of credit searches to the reference agencies such as Experian, Creditsafe etc have increased hugely since pre-Covid days, so clearly many business owners agree that it is now time to take more care about who you trade with.
However, whilst using searches is recommended as the first course of action for any sensible company, relying solely on a score calculated by an algorithm using outdated publicly available information can still be very risky and this is where credit insurance policies can provide much a greater level of protection.
An evolving market
Many companies will know the names of Euler and Coface but the number of insurers in this market has increased in recent years and therefore the choice of potential suppliers to business owners is now greater.
The Government’s Credit Insurance Support Scheme which was finally agreed in the summer, but backdated to 1st April 2020, did allow the credit insurance market some breathing space, whilst companies adjusted to the impact of lockdowns and considered what their future trading patterns would look like.
However, this support ends on 30th June 2021, so the market is likely to look very different after that date, as insurers reconsider their capacity to cover risk and the resultant cost of those policies.
Taking action to ensure you have cover
If you have an existing policy, whether organised directly or as a part of a debtor finance or factoring agreement, we can ask our broker to carry out a no-cost review of that policy, to assess whether it provides good cover and how the pricing and facility compares to the wider market. So do get in touch to request such a review if you think it would be useful. Typically, brokers look at pricing for new cover four months in advance of any renewal date, so don’t leave it too late, especially this year.
For other companies who haven’t taken a policy before, it is well worth considering whether you would benefit from using such an insurance product to protect short-term cash flow, have early warnings for potential default, to vet potential customers and to provide you with confidence to grow.
Protecting your own credit score
We know that there are two groups of potential stakeholders who can impact your own credit score which will affect the credit you are able to access from your suppliers. We are able to support a review with both, and hopefully an improvement, to enable you to gain a higher amount of credit.
- Credit rating with Credit Reference Agencies – we offer a Credit Improvement product which, on a no-win, no fee basis, can seek to improve your credit score with the major agencies by providing further financial information to them under a non-disclosure agreement.
- Credit rating with Insurers – if you arrange your own policy through our broker, there would be no charge for this review. If you only want to review your rating with Euler etc, but don’t require your own policy, this service is still available, but there would be a cost.
We hope you have found that information useful and please do not hesitate to contact us about any of the issues discussed above.