WHAT
IS CREDIT INSURANCE?
WHY
DOES MY COMPANY NEED CREDIT
INSURANCE?
With all the technical
jargon being used to describe
products and/or services, we
would like to take a moment to
simplify what could very
possibly be one of the most
important decisions you will
ever make for your company.
CREDIT INSURANCE: Credit
insurance is defined as an
insurance policy taken out by the
seller of products and/or
services against nonpayment by
their buyers.
This means that the policy
you purchase through an
insurance company, gives you
conditional assurance, that
you will receive payment in
the event that your buyer is
unable to pay.
WHY SHOULD I BUY CREDIT
INSURANCE?
- Credit insurance
reduces your risk. The
policy will reduce your
risk against non-payment
through it's guarantee.
- Credit insurance is
an effective marketing and
sales tool. A policy
enables you to increase
your presence in new
market be more competitive
by extending higher and
longer credit terms with
buyers.
- Credit insurance is a
smart financial tool. Banks
view insured clients as
competent clients. If your
products are insured
against non-payment, banks
may consider raising your
borrowing capacity, or
borrowing under more
attractive terms, i.e.
lower rates.
- Credit insurance
reduces the need for
letters of credit.
If
you have a policy, there
is no need for your client
to issue a letter of
credit before buying your
products or services. Most
of the paperwork is done
when the buyer is being
approved for insurance.
This reduces the amount of
paperwork for both
parties, and the expense
that the buyer endures
with every letter of
credit.
Date Updated: March 27, 2007
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