How trade credit works
- Credit limits. The insurer reviews the client's customers and sets a limit for each buyer it will cover.
- Indemnity percentage. The policy pays a share of the covered loss, not the full invoice, so the client keeps some risk.
- Waiting period. For non-payment that is not formal insolvency, the policy pays after a defined protracted default period.
- Reporting. The client reports overdue accounts and sales as the policy requires. Missed reporting can void a claim.
Why clients buy it
- One customer's insolvency would wipe out a year's profit.
- The client wants to extend more credit to grow sales without taking more risk.
- A lender will advance more against insured receivables.
- The client is selling into new markets or new countries.
Receivables cover for contractors
Contractors face the same exposure on deposits, holdbacks, work in progress and pre-shipments when an owner or general contractor fails. Receivables protection can respond to creditor insolvency, political risk and defaults on those amounts. Pair it with contractors legal expense for the collection fight itself.
What it is not
Trade credit is not a surety bond and not a guarantee of payment. It covers commercial receivables from approved buyers, within the credit limits the insurer sets, subject to the policy terms. Consumer debts and disputed invoices are generally outside cover.
How Approved places trade credit
Trade credit is placed file by file. An underwriter reviews the client's customers and terms, approaches the markets that fit, and comes back with a proposal or questions. There is no online quote and no published rate.
