0330-058-8270

Mon - Fri: 9am - 5pm

The growth of any business can be both exciting and worrying. More often than not, growth would mean taking on new customers where it could be difficult to assess their ability to pay for goods and services. Reward does of course come with risk but using credit protection insurance can provide you with invaluable information, limiting your risks whilst allowing you to expand with confidence.

Credit Protection
Credit Protection Banne
Grow with
confidence in an
uncertain world

At Factoring & Finance Review we appreciate that gaining new customers can be daunting as it can be difficult to assess their ability to pay for your goods and services. However, there are ways in which a business can expand whilst still minimising losses and taking a more calculated risk when granting credit terms.

We aim to assist our clients by helping them acquire the tools needed to grow their business with confidence eliminating as much risk as possible. With this in mind, we help our clients access credit protection through one of our approved market leading credit insurers..

What our service providers offer:
  • Up to 90% cover
  • UK and Export creditor protection
Credit Protection can help:
  • Improve cash flow
  • Focus sales effort to secure business growth
  • Secure trade finance
  • Avoid risk and reduce bad debt
  • Enhance trading relationships with your suppliers
  • Give you greater peace of mind
What is credit protection?

Credit protection is basically “Bad Debt Insurance” that helps to protect businesses against loss of revenue from non-payment of commercial debt such as customer Insolvency* and protracted default*. It provides a greater peace of mind when offering credit terms and makes sure that your invoices will be paid and allows you to reliably manage the commercial and political risks of trade.

While credit protection indemnifies losses incurred from non-payment of commercial debt, the ultimate goal is to help your business avoid catastrophic losses and grow profitably. The key is having the best information about companies, sectors and economic trends to make informed credit decisions and therefore avoid or minimise losses.

What impact does bad debt have on a business?

Unpaid invoices can represent up to 35% of a company’s assets and if customers fail to pay it could have a detrimental impact on your ability to trade. Unpaid invoices are often caused by insufficient knowledge of a customer's solvency, made more difficult in the UK due to the limited filing requirements in place at Companies House.

Utilising the knowledge of a credit insurer helps you pick the right customers, markets and credit limits in order to avoid and minimise non-payment of commercial debt. As a result, you will have a greater confidence in extending more credit to current customers and pursuing new, larger customers that would otherwise seem too risky. If your customers fail to pay, the credit insurer will take care of the debt collection and forward you the cash for the insured invoices at an agreed point in time.

Credit Insurance example

If a Company’s profit margin is 5% and one of its customers defaults on debt of £100,000, the company will have to produce additional sales of £2,000,000 in order to make up for the lost profits.

A credit protection policy helps manage your account receivables and compensates you in the event of non-payment. More importantly, the lost cash-flow could be devastating. Non-payment weakens your company and lowers its investment capacity.

How does Credit Protection work?

Once you agree terms with your chosen supplier, they will generally make an assessment of your debtors’ credit worthiness and allocate them an insured credit limit. This will allow you to trade safely with them up to the amount of the limit.

At any time during the policy’s life, you may request additional cover for trade with any of your customers, should the need arise. The service provider will continuously monitor each of your insured customers and will evaluate the risk of increasing the cover and either approve the additional credit limit request or decline it with a clear and timely explanation. You can also request a credit limit for a new customer that you would like to start trading with.

It is the service provider’s responsibility to proactively monitor the credit worthiness of your customers. They do this by gathering information about your customers from a variety of sources, including visits to the customer, public records, information supplied by other policyholders that sell to the same customer, receipt of financial statements and past due reports.

This information is constantly being updated and cross referenced. If the information indicates one of your customers is experiencing financial difficulty, they will notify you of the increased risk and help you establish an action plan to mitigate and avoid loss.

While credit protection indemnifies losses incurred from non-payment of commercial debt, the ultimate goal is to help your business avoid foreseeable losses. If a loss does occur with an insured customer, the service provider will indemnify the loss up to the policy’s credit limit.

* Definitions

Customer Insolvency

A customer is considered to be insolvent when the party has ceased to pay its debts in the ordinary course of business, or cannot pay its debts as they become due, or is insolvent within the meaning of the Bankruptcy Code.

Protracted Default

This is when a customer has not paid and is past the payment due date. This is usually triggered at 60 to 90 days past the payment due date. (Clarification should be sought from the credit insurer as to the exact date that they consider a customer to be within the protracted default period).

We aim to offer our clients support in gaining business finance through one of our approved lenders, whether it be for a cash injection or simply to alleviate pressure when paying creditors at the quarter end.

We continuously update the lending criteria of our panel, ensuring that we match you with only those who are suitable, therefore saving you time and frustration from day one.

We will work closely with both you and the lenders throughout the whole process, ensuring your application is complete in the quickest of timescales, enabling you to gain access to funds needed to support your business ambitions

The typical loan types we support through our approved lenders are as follows:

Unsecured
Business
Loan

Secured
Business
Loan

VAT Loan

Bridging Loan

Development Finance Loan

General Lending Criteria & Considerations

Each lender will have their own criteria for acceptance and they can vary significantly from each other. Some lenders will only support low risk clients whereas others may take more of a risk, but this is more often than not reflected within the rates charged for the loans. Below you will see some of the considerations and information reviewed when assessing a client’s suitability for loan approval:

  • Last filed financial accounts
  • Current Balance Sheet and Profit and Loss
  • Bank statement review (generally the last three months)
  • Payment history (e.g. late payments, County Court Judgements)
  • Turnover and profitability
  • Trading history
  • Confirmation of both VAT & PAYE current position
**Please note Bridging loans & Development Finance loans differ in criteria from general loans. Please see individual information pages for full details
  • Business to be trading for a minimum of two years
  • The business is profitable
  • No legal notices or insolvency proceedings
  • Defaults must be over two years old and not more than £1,000 in value or a reasonable explanation must be provided
  • Be a registered business within the UK
  • UK homeowner (minimum of one Director for unsecured loans with asset equity to cover loan value in order to support the personal guarantee)
  • The loan amount is less than 25% of the business annual turnover (revenue and turnover will be assessed to confirm affordability to this level)

All of the factors above will be taken into consideration, allowing the lender to make a full assessment with regards to the suitability of your business for lending purposes. The ability to repay the loan is also taken into consideration. Although you may feel that the assessment criteria are extensive, our lenders tend to be much more flexible than high street banks.

Interest rates

If your business is approved for lending purposes, the loan will incur an interest rate in line with your business risk profile. The business profile is categorised in three different tiers, high, medium and low risk. The risk calculation will be based on the assessment made by the financier during their application and approval process. You should expect that the higher the risk, the higher the cost of the finance.

The assessment will consider all aspects, such as the loan term, business profitability and length of trading in the current sector. One of the best indicators of what interest rate you'll pay for a loan is to review your business credit rating. If your credit history is poor then you’re likely to pay higher rates of interest. The stronger the credit rating and a strong financial standing should see your business profile improve, which in hand should see a reduction in the interest rates payable.