Trade
Finance / Cash Flow Secrets!
It must be the economic
slowdown or maybe the increase
of U.S. and & foreign
bankruptcies that are driving
credit insurance sales to new
highs. The meltdown of our
previous robust economy has
companies scrambling to
maintain their cash flow and
collect their receivables in a
timely manner. Payments are
getting stretched, banks are
getting tight on their
lending, inventories are
building, and too many
companies are filing for
bankruptcy protection because
of these factors.
Credit insurance, like any
other form of insurance,
protects you from risks.
Unlike property, auto, life,
or business insurance it
provides companies with many
other benefits other than pure
risk mitigation such as:
SECURITY ON LOANS
- Increases borrower cash
flow
- Provides access to a
professional credit
management and collection
partner
- Reduces loan default risk
associated with buyers,
"failure to pay"
- May be leveraged to
increase bank working
capital facilities
- Reduces the cost of
borrowing
COMPETITIVE SALES TERMS
- Seller financing with open
account terms helps your
customers buy more product.
- Makes your company more
competitive in the domestic
or foreign markets.
- Enables companies to
market and sell more
aggressively to high-risk
markets safely.
- Credit insurance is
usually less expensive than
letters of credit or secured
payments.
One company that recently
hailed the virtues and
benefits of credit insurance
was able to greatly increase
their borrowing base while
lowering its interest rate
too. Their bank was
limiting their foreign
receivables, over $1 million
per month, to 20% of their
actual borrowing formula.
With credit insurance they are
now including 80% into their
borrowing base. The best part
of this scenario is that they
were also successful in
negotiating lower interest
rates, which actually paid for
the insurance premium. The
company enhanced its financial
position at virtually no cost.
Smart CFO’s insure their
domestic and foreign sales
portfolio in what is called a
Global Insurance Policy. This
drives the total cost of
insurance down even further
and provides comprehensive
protection in today’s
volatile markets. Why more
companies do not use this
trade tool to their advantage
is beyond my imagination. Most
likely it’s a lack of
product knowledge and
awareness of what these
products can do for a
companies finances.
John Toles, President of
Universal Trade Services Ltd.,
welcomes your comments or
questions. He can be reached
at 616-554-8858.
Date Updated: March 27, 2007
|
