We often think of trade credit insurance as a protection on our trade receivables against loss from protracted default, insolvency or bankruptcy.
Monetize Your Trade Receivables With Trade Credit Insurance
Did you know that you can employ trade credit insurance as a trade financing tool to MONETIZE YOUR TRADE RECEIVABLES? Let us show you how from an actual case scenario below:
Our client is a Singapore exporter of computer products and accessories. He secured a large computer desktops order from a Latin American telco buyer. The telco bundles them with their internet services. The bulk of his exports to buyers are either on Documents against Acceptance terms (120 days) or on open account basis (120 days credit). Consequently, our client faces problems in their execution due to tight liquidity.
To ease his cash flow, we suggested to him to monetize his trade receivables by financing with his banks. We advised that the banks would want to satisfy themselves of the credit worthiness of the exporter. In addition, they will want to look at the security of the receivables before they grant this financing facility. What happens in the event of payment default by buyer, trade embargo, currency inconvertibility or non-transfer of funds and how are the banks protected in any of these events?
We assured the exporter that we can help him allay the banks’ concerns by providing trade credit insurance against losses from such defaults.
The insurer will be of first class security with good credit rating and the banks will be named as loss payee in the insurance policy.
For that reason, our innovative financing solution received approval from the banks’ credit committee. As a result, the exporter’s cash flow improved which paved the way for shipments to go ahead. The exporter fulfilled his order.
Likewise, if you have a need for trade credit insurance or want to know more about the subject, talk to us.
Jimmy Kho Head – Trade Credit, Bond & Political Risks ACORN INTERNATIONAL NETW0RK PTE LTD DID: +65 6592 8824 Fax: +65 6592 6500 Mobile: +65 93861934 Email: JimmyKhoKB@acornint.com