Trading | Manufacturing
Protecting Your Trade Receivables
Trading Manufacturing Insurance
For Traders, Wholesalers and Distributors
It is a given that traders, wholesalers or distributors need to operate with very high volumes, and at very fine margins, constantly seeking out new customers and having to expand to unfamiliar markets to achieve growth and profitability. Moreover, in a trading environment, the ability to grant documentary collection or unsecured and open-credit terms is not only a source of competitive advantage, but increasingly becoming a necessity. While some traders, wholesalers and distributors continue to sell under letters of credit or payment in advance, their buyers are increasingly demanding and turning to sellers who can offer documentary collection or open credit terms as a basis of competitiveness, and where suppliers are expected to help ‘fund’ their customer’s working capital requirements in the face of increasingly and sustained cost of borrowing environment.
Considering that outstanding receivables for a trader, wholesaler and distributor at any given time can be up to 80% or often more of its balance sheet, it is a material risk which is often overlooked even as other insurances such as cargo policies is a norm.
Losses arising from non-payment of receivables can be a capital event impacting the retained earnings or worse, the going concern of a company for the trader and/or its proprietor(s).
Trivia: Are you aware that what is commonly known as “T/T at sight”, “D/P Sight or “D/A 90 days from shipment” is in most cases still an open credit unsecured debt while the goods are in voyage?
Manufacturers face heavy fixed overheads and often have large depreciation expenses that erode profitability. And even while some manufacturers are cashflow positive, the challenges in selling products at unit prices that do not produce positive contribution margins mean that your P&L will report economic losses which in turn reduce the equity of its owners.
Economies of scale, whether from increased credit sales, or new buyers or even buyers in new markets then becomes important to not only diversify but to achieve profitability. Trade Credit Insurance can significantly mitigate bad debts by co-sharing up to 90% of those losses.
Trivia: Did you know that aside from trade credit insurance (or debtor protection insurance) that you can also obtain cover from work-in-progress or pre-shipment risks? If you had to make pre-orders with specific designs or materials to fulfil your sales orders there are added risks if you had to procure them on a binding contract basis from your suppliers.
Come please talk with us and we can help you negotiate a policy that can offer protection to your receivables risks from payment default or identify gaps in your existing policy if you already have one.
We can assist you with assigning your trade credit policy to your banks as a valid and acceptable security / collateral, which will provide your bankers with additional comfort over their lending facilities to you.
YOU Always Come First.
At TIB, we’ll help you unbiasedly choose only the coverage you need. We’ve built our reputation on decades of putting customers first and our experts are always on hand to deliver personalised service and support.
Trade Credit Policy
(also known as debtor protection insurance, export credit insurance)
(collectively known as commercial “non-payment”)
Non-acceptance or repudiation (of goods)
Short-Term Political Risk
Public Buyer Default
Currency Inconvertibility / Non-Transfer
Import / Export Restrictions
A DEDICATED IN-HOUSE CLAIMS TEAM
At Tan Insurance Brokers, we understand the pain and frustration you face in the event of claims. With an experienced and dedicated claims team, we are able to handle these processes professionally, facilitate payout and achieve a fair settlement for all parties involved.
*Read more about our claims process here.