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If you trade or sell goods on a credit basis, you’re at risk of bad debt or non-payment by customers. This can disrupt your cashflow and leave you out of pocket.
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Winemaker avoids further lending
As a small winemaker who has been exporting overseas for five years, Debra faces two challenges. Like other winemakers, she has a long working capital cycle. Secondly, there’s the risk of non-payment, especially among new export clients.
Debra only exports small shipments and takes out comprehensive trade credit insurance. This strategy pays off, as she sends a shipment to a new client who doesn’t pay. After unsuccessful attempts at getting the payment, Debra makes a successful claim on her trade credit insurance.
The insurance payout covers her loss, which fills the gap that the non-payment made in her cash flow. This means she doesn’t have to borrow money to keep her business going.