Why should my business consider a Credit Insurance policy?
Case Study: How a well-known bakery in the southeast used Credit Insurance to grow its business abroad by targeting financially robust companies.
John, the owner of the company explained “We were on a mission to grow our business by 10% year on year. Brexit was around the corner, and we didn’t want to be so reliant on the UK market for the majority of our export sales. We made a big investment in hiring new people and buying new machinery. The time was right to explore further afield and into new European markets, just like we had always dreamed of doing”
John and his team attended a trade fair in Germany, where they made some good contacts, did some deals, and subsequently began a new business relationship with a long-established German wholesaler. John had the German wholesaler complete a credit application form, he received 2 trade references, and John also managed to gather some financial information on his new client from a credit report. John happily embarked on regular trade with his new business client and soon he was sending him about €10,000 worth of produce every 2 weeks. Everything was going well for about 10 months. “We began to see a slowdown in the receipt of payments. They had been very good, prompt payers up until that point. They began asking for extensions on their payment terms, which we agreed to, but as time went on it became harder to get a response to our requests for payments”. Eventually they stopped answering altogether and 14 months later they had gone bust leaving John’s company with a bad debt of 60k. “At the time I felt naive. I questioned my thinking and beat myself up about how I could have let myself and the business get caught like that. However, having learned a valuable lesson, we were still determined to forge ahead with our plans to sell beyond the UK. I knew we could still do this, we just needed to be smarter and take a different approach going forward”
John spoke to a close business associate about what had just happened, who recommended John look at credit insurance. His business associate explained that he had been using credit insurance for several years and depended on the financial information provided by the credit insurance company to make decisions on whether to provide credit to any new business clients. He also used it to continually monitor his existing clients and received regular updates about the financial viability of his clients from the credit insurer on an ongoing basis.
After exploring the options, John took out his own credit insurance policy. He said “having a credit insurance policy allows me to take on new customers without having to worry if they will pay me or not. The process is easy. I apply for a credit limit based on my trading requirements through their online portal and they usually come back to me immediately with a decision as to whether they will insure the client or not. If it’s a yes, great, – I’m now insured for up to 90% of my outstanding invoices. If it’s a no, that’s good information too, as it means I won’t trade with them. Either way, I now don’t have to worry about if I will get paid or not. I can sleep better at night knowing I’m protected, and my business is free to keep growing. I can get on with the day to day stuff, – meeting clients, doing deals and selling our great products to more people around the world.
Another great aspect of credit insurance is the debt collection element. Debt Collection is usually standard on all policies with either zero, or minimal costs to chase any outstanding invoices. The insurers generally use global debt collection companies to collect the debt no matter where in the world it is. It means they can speak the local language and they know the laws of the land. It can be extremely cost-efficient and time-saving.
Credit Insurance is also of great value if you require working capital finance, as it gives the lender great confidence that you are doing everything you can to secure your business. Because it also means you get paid quicker, it means the lenders’ finances are more secure.
Who can advise me on a Credit Insurance policy?
Please contact Sinead Wolfe to discuss your credit insurance needs. Sinead can offer expert advice in relation to Credit Insurance, having worked in this space for the last 14 years with one of Irelands leading Credit Insurance providers. Prior to joining LHK in 2022, Sinead worked with one of Irelands leading Credit Insurance companies for 14 years. Sinead’s approach is about offering advice and best practice guidance on all the aspects of the credit management process including credit risk analysis, credit management best practices and debt collection. Whether you have a credit insurance policy in place currently and would like to review it to ensure you are getting the best cover and price, or if you want to explore the benefits of a credit insurance policy and obtain a quote for your business, she can talk to you about this. Please email or contact Sinead directly
How do I get a quote?
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