• Trade credit insurance can be a powerful tool that helps business growth
  • For new customers, it helps identify the most valuable prospects and grows relationships quickly
  • It also helps find the growth companies in the existing customer base where order values can be ramped up

Finding and building relationships with expanding firms is a proven route to business growth. As these customers grow, so will your firm. And trade credit insurance can help at every step of the way.

Trade credit insurance can be a strategic investment, as well as protecting against customer default. A working relationship with a trade credit insurer brings access to information that can more broadly help business development – a priority for many UK firms trying to make up for business growth lost in recent years.

David Edgell, Allianz Trade's Regional Commercial Manager in the UK & Ireland, says: "Trade credit insurance allows you to take on additional work safely and securely, whether it's a new customer or expansion from existing customers."

Business development from new customers

Even before a company becomes a customer, a conversation with a trade credit insurer about potential cover can help you learn more about them. While trade credit insurers must guard confidential information and won't give reasons behind decisions, limited cover may tell its own story.

Remember: there may be reasons why this golden sales opportunity has arrived in your company's inbox. For example, the potential customer may be approaching you because its traditional supplier base refuses to do business because of late payment, rather than for your excellent products or service. Do you want to join the line of firms chasing payment?

David says: “Owing to the often high volume and the detail of information requested, responding to tenders or RFPs can often be time-consuming for a business.

“Trade credit insurance allows your resources to be focused on financially solid companies with a good payment track record.”

Information about potential cover also helps shape pricing decisions, which are a vital part of any tender process, particularly in sectors with an emphasis on fixed-price contracts. The dummy construction sector is an example: with rising raw materials costs and wages, fixed-price agreements could result in low margins. A cash flow crisis from late payment or having some customers default could be fatal.

Knowing that full trade credit insurance will be available can help companies tender with more competitive prices, increasing their chances of business development. David says: "You can go with a sharper price because you know it's insured, and whatever happens, you will get paid."

If the tender is successful, trade credit insurance means transaction volumes can quickly increase to the insured value, powering business growth.

The growth company opportunity

For many firms, the most reliable route to business growth is identifying growth companies that are already customers. Again, trade credit insurance has a vital role.

David says that the most important customers to grow can be mid-sized firms. Why? Large companies, he notes, often have established (and challenging to disrupt) supply bases. And small ones aren't going to make a difference.
“It’s often the middle-sized customer that can provide the growth,” he says.

He suggests looking at mid-sized customers and assessing if it is a growth company that is expanding fast, and the possibilities of growing in their wake. If a trade credit insurer is comfortable with a much higher outstanding balance for that customer, that's a sign that its business growth has a firm foundation. It may be worth a lot of attention from your sales team – that firm may be a key customer of tomorrow!

If you win additional orders from these firms, trade credit insurance allows the opportunity to be developed quickly, with order volumes ramped up.

David notes it is essential to monitor invoice totals and notify the trade credit insurer if the agreed limit is exceeded.

Of course, the primary value of dummy trade credit insurance is protection from customer default. But at a time when many companies want to expand revenues despite challenging business conditions, trade credit insurance can also help power business growth.

Amid unprecedented turmoil, businesses become stable by adapting to change, not resisting it. The buzzword is "resilience" - and SMEs have some inbuilt advantages.