Failed Electronics retailer Dick Smith, a name synonymous with electrical sales in NZ, left debts of over $22 Million to unsecured creditors, mainly small suppliers.

As a supplier to any company, for Goods or Services, you can use Insurance to protect your Balance Sheet and stop your debtors dragging you with them.

When a big company fails, there are consequences for heaps of smaller companies – and employees. The collapse of Mainzeal a few years ago also left a lot of Sub Contractors out of pocket and even unable to work as their gear was locked away on closed sites for weeks afterward.

But it doesn’t have to be a major company failing that can cause small companies problems. Even a receivership or liquidation that doesn’t make the headlines can have disastrous consequences on businesses that are owed money for goods and services supplied.

That is where Trade Credit Insurance can become really vital to a businesses’ survival.

We as Kiwis are really good at insuring our stuff – our cars and homes and businesses – but unless a Balance Sheet is Insured with Trade Credit insurance it can all still go to waste.

Trade Credit Insurance doesn’t just cover full scale problems, like your Debtors going in Receivership or Liquidation, but also if they just do not pay up in timely fashion. Most policies are able to pay out after a certain time has elapsed – often about 4 months.

This can be the difference in keeping your Creditors happy and your lenders onside.

Trade Credit can be a real benefit in your relationship with your bank. The more comfortable lenders are with your security position, the better their terms and the less onerous their requirements. They may release Directors Guarantees or some other security if you cover Trade Credit.

If you have high levels of exposure to a few Debtors, or you Export overseas – and would like to further expand your markets – the security that a Trade Credit Insurance provides gives you the confidence and the security to work, to grow and retain your Peace of Mind.

Currently Trade Credit suits Business with a turnover approaching $2 Million or more, and costs around $10k.  This should be tax deductible, both for GST and Income Tax – consult your Tax Advisor for full details.

More products are being released, to support smaller businesses and tradies and I’ll be updating our offering once Insurers change their products. Watch this space, and keep in touch.

When you’d like to know more, contact RDi here for more info on Trade Credit Insurance

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