Frequently Asked Questions About Trade Credit (Accounts Receivable) Insurance

I have never heard of Trade Credit Insurance. What is it?

Go to this link to learn more about what is – and is not – Trade Credit Insurance.

Do I have to Insure all of our company’s Buyers (Accounts Receivable)? 

You can insure just one Buyer, especially if your company has large sales volume and credit exposure to this Single Buyer.    However, there are minimum insurance costs just to cover one Buyer.  Or, your company might elect to cover ALL of your Key Buyers (that make up at least 50% of annual sales).  Some companies desire to cover 100% of their Buyers – both Domestic and International – because of the need for maximum bank working capital financing.  So the choice is yours - World Trade Consult will assist you in structuring the broadest coverage for the most competitive cost or insuring just one large Export Buyer if that is your desire.

How will Trade Credit Insurance Help my business? 

There are three main benefits to having your company’s Trade Accounts Receivable insured:  1) Reduce Risk of Loss – Trade Credit Insurance protects your company against Domestic and/or International Buyer non-payment of your company’s Open Account Invoices, 2) Improve Market Penetration/Grow Sales – it enables your company to offer more competitive credit payment terms directly to your Buyers (especially for Export Sales), and 3) Increase Access to Working Capital Financing – Trade Credit Insurance frees up additional collateral (especially Export Accounts Receivable) that can be assigned to your lender. Export Accounts Receivable and Concentrations of Credit are not usually included in normal lender collateral borrowing base calculations UNLESS these unique Accounts Receivable assets are insured with Credit Insurance and the insured proceeds are assigned to the lender.

Trade Credit Insurance – is it the same as Factoring? 

Factors provide liquidity to a company, similar to banks.  However, credit insurance is not the same as factoring, but it does protect against non-payment of your invoices by your customers.  As such it enables your company to borrow against your Accounts Receivable that are insured.  Factoring costs are high relative to bank borrowing costs as well as Trade Credit Insurance costs.

We feel we have a good handle on our Domestic Accounts Receivable risks.  But our Export Sales are growing.  Can we insure just our Export Accounts Receivable? 

Yes.  We can carve out just your Export Accounts Receivable, structure policy coverage that meets your needs, and approach the various insurance markets that cover Export risks (foreign commercial and foreign political risks that can cause loss to your company) for quotations and terms – all at no obligation to you.  We have over 40 years of international trade finance and export accounts receivable experience.  We are multilingual, assisting our clients with analysis of their Latin American customers’ financial statements.  Mr. Koch was a former banking executive and has travelled to over 40 countries and conducted business for clients in over 60 countries in his trade banking and insurance careers.  Finally, we have been honored as the Export-Import Bank of the United States’ Small Business Broker of the Year (2009), a national recognition for our success in helping companies protect their Export Accounts Receivable from loss.  Keep in mind that we can help you insure just one Single Buyer, or Multiple Buyers under an Export Credit Insurance Policy.  You can obtain Export Credit Insurance covering payment terms as short as Cash Against Documents or depending on the product being exported, as long as 7 years after date of shipment.

How well do you work with commercial bankers/lenders?

Mr. Koch was a commercial banker for 26 years, the first 18 being in international trade finance where he used Export Credit Insurance as a risk hedge for his bank’s export finance loans.  Having worked with the Export Credit Insurance and Export Loan Guarantee Programs with the Export-Import Bank of the United States (Ex-Im Bank) for nearly 40 years, he is well recognized for his expertise in Export Finance and Export Risks in the Supply Chain.  A number of the major US banks involved in Export Financing and Asset Based Lending refer their clients routinely to World Trade Consult, LLC for assistance.  Our understanding of and expertise in ‘credit’ allows us to bring more than just insurance knowledge – we are bankers at heart and know how to work well with commercial lenders.

If we use a broker, won’t our Trade Credit Insurance costs be higher?

No, your costs of Trade Credit Insurance are the same – with or without the involvement of a qualified broker.  Since the insurance costs are the same, it pays to utilize the many services and expertise of a reputable, industry-recognized broker that specializes in Trade Credit and Supply Chain risk insurance coverages.  Remember, we work for you, not the insurance carrier.  We advocate for your best interests and work to obtain the broadest coverage for the most competitive costs.  And when it comes to submitting a Claim, wouldn’t you want World Trade Consult, LLC to be in ‘your’ corner with you, helping you support the Claim properly and moving towards appropriate Settlement as soon as possible?  It pays to use a qualified Trade Credit Insurance Broker like World Trade Consult, LLC.

What do CCE and CICE stand for? 

CCE and CICE are two of the highest professional credit industry recognitions earned by credit executives.  CCE is ‘Certified Credit Executive’, conferred by the National Association of Credit Management (NACM) after rigorous ‘credit’ educational and working experience/leadership levels have been attained by the candidates.  CICE is ‘Certified International Credit Executive’, conferred by FCIB, an Association of Executives in Finance, Credit and International Business.  Credit Managers of major corporations recognize the CCE and CICE as the pinnacles of professional credit achievement.  Mr. Koch is one of just 25 credit professionals – worldwide – that have earned and received both professional credit designations.