2023-06-30 17:04:27
In 2022, more than 9,600 Spanish companies declared technical bankruptcy, which places Spain as the second country in the European Union in the ranking (only surpassed by France, the country that has increased the most in percentage compared to previous years). . Among the reasons that lead entrepreneurs to close the business is the lack of liquidity generated by defaults. Debts that have not been paid or are paid off too late, when the business has reached bankruptcy.
Credit insurance to protect your business?
Guaranteeing collection and minimizing financial impacts in the event of non-payment is one of the main objectives of a company when maintaining business relationships with a portfolio of clients. The risk of non-payment is a constant reality and more and more businessmen are looking for backups that provide financial security to their businesses against possible unforeseen events.
An option widely used by entrepreneurs to deal with this type of situation is Credit insurance. These insurances offer an effective solution and provide the businessman with the peace of mind that his business and capital are insured against risks that could go unnoticed. In this way, the entrepreneur can make specific investments with greater confidence that his business is protected.
Depending on the policy that is contracted, it can offer complementary services to compensation in the event of non-payment, such as information on the financial strength of clients and recovery of unpaid debts. Learn how credit insurance works and understanding your coverage can be of great help when hiring this type of service.
Customer information and rating
The credit insurers that offer this service base their strategy on monitoring the clients and business partners of the contracting company. They produce a report detailing the financial possibilities and strength of current and potential customers. This study also contemplates the present and future situation of the companies’ country of origin, in addition to the risks that may arise in the national and international economic context.
This analysis framework establishes a customer rating system, a piece of information that is very useful for making decisions about whether or not to establish a business relationship with an unknown company or with which no agreement has yet been made. This report is made by expert analysts in very defined markets.
Collection of unpaid debts
In addition, insurers offer debt collection services, which implies that they make the necessary efforts to recover outstanding debts through their knowledge of laws and support in their team of experts. This service is essential when business relationships with clients result in non-payments that can seriously affect the company’s benefits.
Indemnity in case of non-payment
In the event that the amount owed cannot be collected, the insurers provide compensation to the insured according to the agreed conditions. This is to ensure business continuity.
Credit insurance adapts to the needs
A positive aspect of Credit insurance is that they adapt to different demands, since an SME does not have the same needs as a multinational. Credit risk coverage is personalized, especially according to the size of the company.
SMEs face risks of lesser economic value, but which may compromise the viability of the business in the event of default. For this type of company, simpler and more accessible policies are recommended. On the other hand, as companies grow in size, they look for broader coverage that includes specific deadlines for compensation or more detailed reports.
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