Not every business is suffering from the credit
crunch, there is one product which is shown phenomenal growth over the
last few months -- and that is credit insurance, which is taken out by
companies that wish to protect themselves from financial disaster in
the event of a customer, that owes them money, going bust. The
majority of new business is coming from smaller companies which are
getting edgy about just how safe the large companies that they have
dealt with for a long period in these financially uncertain times.
Their fears appeared to be justified too, because many of them are
being turned down because of the instability of their customers, and
others are finding their premiums rocketing as more and more companies
file claims for bad debts. Suppliers to several high street giants
which have been household names decades have found that cover has been
withdrawn completely for supplies to these companies, a factor which
will no doubt help to push these giants further towards liquidation
and change the faces of high streets and shopping centres throughout
Britain.
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Particularly badly hit are
companies trading in the retail and construction sectors, both of
which are suffering a considerable downturn in trading conditions,
with no end to the current difficulties in sight as yet.
The purpose of credit insurance
is to provide a financial umbrella by paying out about 95% of a bad
debt within, usually, six months or so of the debt becoming overdue.
This not only offers traders protection from defaults which could
threaten the very existence of their businesses, but also stimulate
trade by giving companies confidence that they will ultimately be
paid. Without this cover many entrepreneurs will simply refuse to take
what they see as excessive risks, with a subsequent reduction in
business volume.
One particular advantage of
working with a credit insurance company is that they have to keep
themselves aware of what is going on in the markets, and which
companies are credit worthy and which are not. They are therefore
ideally situated to warn their clients of potential default
situations, which is a huge boon to management personnel who may be
too busy in ensuring delivery of a quality product on time to be
completely up to date on their customers' credit worthiness and
long-time viability.
