What is Credit Insurance/Trade Credit Management?
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Euler Hermes > Credit insurance > Our expertise > What is credit insurance?

What is credit insurance?

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Credit insurance protects your business from non-payment of commercial debt. It makes sure that your invoices will be paid and allows you to reliably manage the commercial and political risks of trade, resulting in safer and more strategic accounts receivable management.

While credit insurance indemnifies losses incurred if your customers fail to pay trade debts, the ultimate goals of our credit management services are to help your business avoid catastrophic losses and grow profitability. The key is having the best information about companies, sectors and economic trends in order to make informed credit decisions, minimize losses and expand into new markets. 
 
The video below further illustrates how credit insurance works, and how it can benefit your company:
 
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INSUFFICIENT KNOWLEDGE A SOURCE OF UNPAID INVOICES  


Unpaid invoices can represent up to 40 percent of a company’s assets and are vulnerable to loss if your customers fail to pay. Euler Hermes knows that many unpaid invoices are caused by insufficient knowledge about your customers’ solvency, and we believe that proper accounts receivable management could reduce risk and uncertainty.

Our knowledge helps you pick the right customers, markets and credit limits in order to avoid and minimize non-payment of commercial debt. As a result, you have greater confidence extending more credit to current customers and pursuing new, larger customers that would otherwise seem too risky. If your customers fail to pay, we will forward you the cash for the insured invoices and take care of the debt collection.
 
Any company selling to other businesses on open account terms can benefit from trade credit insurance. Our clients can be found in all sectors and are companies of all sizes. Firms in most sectors of the economy, including business services and those trading actual goods, use credit insurance protection on their trade accounts receivable to help their businesses grow and succeed.​​
 

CREDIT INSURANCE EXA​MPLE


If a company’s profit margin is 5 percent and one of its customers defaults on debt of $100,000, the company will have to produce additional sales of $2,000,000 to make up for the lost profits.

A trade credit insurance policy helps manage your account receivable and compensates you in the event of non-payment. The lost cash flow could be devastating, as non-payment weakens your company and lowers its investment capacity.
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> Download the Euler Hermes White paper, "A Guide to Credit Insurance"