Exporting can be a great way for businesses to expand, increase profits and establish their reputation as a global player. However, like any other area of business, high rewards go hand in hand with high risks.
Making sure businesses can get paid and trust their customers is a big issue. When SMEs can’t visit customers in their markets of interest, the question of trust is made more prevalent by a lack of face to face contact.
In the UK, around 40% of companies offer credit terms to their customers. Credit terms attract customers who want to buy but don’t want to face the risk of paying up front before receiving goods or a service. Essentially, this gives companies on both sides assurance that the transaction will be completed. Unsurprisingly, credit terms are very popular. However, with nearly 60% of European companies reporting adverse effects due to late payments, credit often ends up being riskier for those selling than those buying.
So how do companies manage offering attractive payment terms to customers whilst protecting their own financial interest?
In a nutshell, credit insurance can protect credit offering companies. This can mean that if a company’s customer faces problems, such as insolvency or they can no longer trade due to in-country issues, non-payment falls to the Credit Insurer rather than the company expecting payment.
Reputable Credit Insurers will vet potential prospects and customers to verify their financial status. A good Credit Insurer should also have a well-rounded understanding of political, economic and legal affairs in each market a business is interested in.
The Chamber is proud to partner with Credit Risk Solutions, an insurer with a wealth of international and domestic experience. To find out more about them click here.
The next International Trade Forum is centred around the theme risk and planning in light of Brexit, and experts will be discussing effective use of credit - book here