How To Prevent Rejected Or Reduced Trade Credit Insurance for Businesses?

Credit Insurance
Credit Insurance
Written by Roger Harrison

The past two years with the Covid pandemic have been extremely difficult for businesses, this article is here to help with the next step out of the pandemic. During this time, there have been millions of pounds worth of help to these businesses from the government. Whether this is through loans, grants, furlough schemes and other services that have been provided to keep businesses running, this really has been a lifeline for many. This has been helpful, but in reality, it has only delayed these businesses from going insolvent. Now that the funding is now getting drawback, more businesses will, unfortunately, become no more.

For those businesses lucky enough to still be open, they will be looking at other avenues where they can help their business grow and thrive in an ever-competitive market.

There are many things to consider when trying to expeditiously grow a business in a recovering economy. For example, it is great wanting to rapidly grow your business, but growing too fast can be crippling for a business. Growing your business too fast will result in your business not being able to cope with the load which will, in turn, harm your cash flow which in turn results in the business failing. Once the business has failed, they will then in turn start looking for claims on their trade credit insurance policies.

Trade credit insurance claims are increasing dramatically for obvious reasons, this has resulted in credit insurance brokers being much more critical with claims and are looking for business failures regarding their compliance with the policy terms and conditions. Business failures can be critical at this stage and if pending on severity, they can result in a reduced or even rejected claim settlement leading to insolvency. in this article, we will go through some helpful tips on how to prevent credit insurance claims from being reduced or rejected.

What Is Trade Credit Insurance?

Trade credit insurance is a cover for businesses who are owed money from their customers for products or services that they have not paid for also known as bad debtors. Credit insurance also covers businesses that have the same issue with their customers but those who are waiting for the payment due to the customer paying later than expected. This cover helps businesses to feel confident in their borrowing ability and extend credit to their new customers and also helps to make it easier to access the funding needed at a more competitive rate. 

How Can I Prevent A Rejected Trade Credit Insurance Claim?

Documentation Is Key

It is a common occurrence that credit insurance claims get thrown out and rejected due to businesses not having the relevant documentation that the insurers need for evidence that you as a business have met the policy terms and conditions. There are many examples of this, such as if a business could not provide a delivery note. By not having the correct documentation, your claim will be rejected for certain.

This is pretty easy to avoid happening to you, you just need to be well organised and have everything filed away accordingly. It is vital that every transaction is well documented as well as everything else that you feel may be important such as invoices etc. this is much easier to do now everything is digital, you shouldn’t have an excuse for being unorganised when you have a business to run. Having everything documented will reduce the chances of your claim being rejected.

Agree On Credit Limits In Advance

Agreeing on a credit limit in advance is essential if you are going to expect a full claim. This counts even for a quick deal. If you allow debt to build up before agreeing on a credit limit, you will more than likely have already put yourself under critical pressure of business affordability that could have been avoided.

There are many instances where this has happened. A business has dealt with the trader for a quick deal, but then try to sort a credit limit, but only after the traders have already built up a high amount of debt. This is a big mistake to make as it is a straight road to becoming insolvent.

The reason why this is critical is the credit limit will only apply for the credit made when the claim is done and a credit limit is agreed upon. This means that all the credit that the trader has accrued is not covered meaning they can’t claim for it.

Be Aware Of Fraud

With a recovering economy, fraudulent activity has been much more common which is unfortunately not covered by a trade credit insurance policy.

There are countless forms of fraud, but the most common is “buyer impersonations”. With a policy not covering fraudulent activity, it is your responsibility to follow all of your credit control procedures including regular checks and due diligence.  By doing this you will have a much better idea of what to look out for, and who you are dealing with so that you can protect yourself from being a victim.

Some Warning Tips For Fraud Include:

  • Be careful when you are contacted from a mobile number, rather than a landline.
  • Be cautious of a site that looks great but doesn’t respond well. A reputable client will have a range of pages that responds well.
  • A business will have a work email, not Gmail, Hotmail or others alike.
  • The buyer doesn’t negotiate the price or even ask for a price. This is something they will want to know instantly, so be wary of this.
  • There is a super-fast process from first contact to request of delivery. Investigate why.
  • The bank account details change
  • A real business will have a solid business address rather than a serviced office.

There are many ways in which you can get the most out of your claims. But if you are wanting more professional help, then credit insurance brokers will be able to give you all the relevant advice that you may need.

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About the author

Roger Harrison

Roger Harrison has been involved with real estate investing for 20 years.

After creating successful real estate investments for himself, he decided to help other people do the same thing.

His goals are to:

Help homeowners save money on the sale of their homes
Help homeowners achieve the best possible outcome from difficult real estate situations
Help people achieve the goals of home ownership