As of November 2017 and in line with the small business commissioners campaign to make a safer place for small business, insurtech companies such as Nimbla are offering alternatives to the current Trade Credit model, as well as visibility on risk. By offering a digital platform that allows them to view the risk on their invoice instantly, the app hopes to mitigate disasters such as Carillion for small business owners. Single Invoice Insurance is available on the app, so customers can protect their invoices immediately and on a one-off basis if required.
25,000 to 30,000 businesses are estimated to be owed money by Britain’s second largest construction firm, Carillion, according to Trade Body Build UK. These devastating numbers are due to the construction giant’s insolvency announced Monday, with reported debts of over £1.5bn. Based on previous cases, it is safe to say that approximately 30% of these companies would not have had any Trade Credit insurance in place.
Trade credit is an agreement where a customer can purchase goods without paying cash, paying the supplier at a later date. Trade Credit insurance is an insurance product that insures suppliers against bad debt such as their customers going bust. It is an essential tool for financial growth. However, it is too expensive for small to medium-sized businesses. Traditional trade credit cover, as a whole turnover product, insures all your customers, or none at all, with the minimum premiums for the service starting at around £3,500 for the year but averaging £8,500 for SMEs. Considering this being the only option, until now, to protect against bad debt, most small business owners were choosing to take on the risk of getting burnt.
Flemming Bengtsen, CEO of Insurtech app Nimbla says: The knock-on effect could be disastrous. Let’s take an example. If a company has £800k outstanding with Carillion (let’s assume zero recovery) that creditor might have a further £500k outstanding with sub-contractors related to that one contract with Carillion. It takes a fairly robust company to withstand that kind of stress. Read his full blog post on the subject here : https://blog.nimbla.com/
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