Business Protection 101:
Cash Flow Security

BY LOU SAMSON

January 26, 2018

Businesses face many types of risk and uncertainties all the time. Business-to-business transactions are especially prone to risks of buyers not paying on time or not paying at all. At one point, suppliers have doubted the ability of their buyers to pay them, specially those asking to pay thirty or sixty days after the invoice due date. In cases like this, managers can rest easier with Trade Credit Insurance. Simply put, Trade Credit Insurance, or TCI for short, is a form of protection that businesses can use to secure invoices made through open accounts or with buyers that pay on credit.

Expand your business with confidence

Buyers usually ask for payment terms when transacting with suppliers, as they prefer more time before they pay for the goods. Due to uncertainty and lack of trust, sellers may turn down these buyers, losing opportunity to increase sales. If these sellers knew about trade credit insurance, they wouldn’t have to reject these opportunities to expand their business. TCI protects transactions made through open accounts, consequently making longer transaction periods plausible. For business who want to expand, it minimizes their risks in exploring the market further and transacting with potential buyers they have not dealt with before.

TCI and financing go hand-in-hand

Trade credit insurance is more than just a protection from non-payment of your buyers. It is also a tool for businesses to open the gates to better financing. Oftentimes, suppliers that transact on open account find themselves strapped with cash as they wait for their buyers to pay. They turn to different financial institutions for a loan, but most of them are turned down for plenty of reasons.

To acquire financing, lenders often require trade credit insurance to mitigate the risk of non-payment and the lack of collaterals from the borrower. Not only does TCI lower the reluctance of lenders to finance the borrower, but it can also lower interest rates and give better financing terms altogether. Borrowers are provided access to more lenders and may even have the chance to choose what would best suit their needs.

Why you’ve probably never heard of trade credit insurance

It is usually the big companies of suppliers and manufacturers involved in cross-border trade who secure credit insurance for their exports. Traditionally, TCI is based on a company’s annual turnover, and insurance providers rarely cater to businesses with less than USD 1 million annual revenue. Because of that, TCI has become largely exclusive to companies with giant annual revenues. With those in mind, although incredibly beneficial, trade credit insurance does not come cheap and is not readily available to the SME market.

Fortunately, VESL is providing innovative solutions to make trade credit insurance more accessible. A first of its kind in Asia, VESL facilitates trade credit insurance, on a “pay per transaction” scheme, making it simple and more practical. With VESL, businesses can access world-class protection at a fraction of the cost. Moreover, VESL brings together insurers, lenders, and suppliers into one convenient and efficient platform. VESL is pushing the limits of trade credit insurance and opening more financing opportunities, so more businesses can can benefit from this instrument.