When considering the costs of trade credit insurance versus the potential loss from bad debt, it is important to take into account the likelihood of a customer defaulting on their payments. If a business operates in an industry with a high risk of bad debts, the cost of trade credit insurance may be well worth it to protect against potential losses in terms of Return on Investment (ROI).
On the other hand, for businesses with a lower risk of facing bad debts, trade credit insurance can give them peace of mind and act as a credit management tool to support their business growth. More importantly, liquidity is crucial for business survival. Aside from cash flow protection, businesses can use credit insurance policies as collateral to access funding with better terms from local banks.