In the past, customers who defaulted on their payments were a problem for traders. They had to manage the business without funds. This led to financial crisis and bankruptcies. Now, tradesmen are more conscious of protecting their business from any possible threat when they get into business. Businesses that rely on a limited number of customers for revenue are more cautious. The buyer defaulting can cause the source of revenue to stop, which could impact the business’s ability to continue operating.
Credit insurance, also known as accounts receivable or trade credit insurance, is a product that protects businesses from bad debts. The trade credit policy eliminates cash flow introduction if a customer defaults on payment. Trade credit insurance agreements generally pay a percentage of the outstanding invoice to avoid bankruptcy and insolvency. Export credit insurance protects the exporter against defaulters from foreign buyers.
You should always take export insurance if you’re an Australian exporter and do international trade with foreign buyers. NTC is the most preferred choice for trade credit insurance in Sydney due to its 30 year experience in this area. NTC offers credit insurance to help protect your business from bad debts from foreign or local buyers.
What’s Export Credit Insurance?
Export credit insurance provides protection for exporters against defaulting foreign buyers. Exporters must be aware of the risks involved in dealing with foreign buyers. Different countries have different cultural and country laws. Changes in import-export regulations, war, rights, revolution and currency inconvertibility can have an impact on exporter’s standard payments.
The benefits of ECI
- Tradesmen can expand confidently into new markets with the ECI protection. The business will receive up to 95% of any foreign invoice if the customer defaults.
- Exporters often have customers who buy more products from them if they can extend their credit terms. Businesses can capitalize on this opportunity to increase their sales with an ECI assurance.
- Banks are more likely to lend against foreign receivables if they find out that businesses have ECI. This is because financial institutions know that the businesses have backup.
- Financial departments must maintain a loss reserve account when doing business. However, ECI can help reduce the loss reserves of a business as they know that they will be compensated for any foreign customers who default.
Two years ago, we realized that the economic future is very uncertain after a pandemic. Numerous small and large businesses have filed for bankruptcy. Due to the increased unemployment and troubled markets, currency policies have been rapidly altered. Businesses that serve foreign markets also face new risks.
Even the most loyal customers with outstanding payment records may sometimes have trouble meeting their payment due dates in this environment. ECI provides assurance that cash flows will not be interrupted during difficult times.