Trade Credit Guarantee

Trade credit guarantee is a type of financial guarantee that protects manufacturers, traders, and service providers against losses from non-payment of goods, invoices, or other debts. It provides entrepreneurs and business owners with the confidence to do business with new customers and, on the whole, improve their access to funding. Trade credit guarantee plays a pivotal role in international trades, as these types of trades are usually larger in terms of monetary value and hence have more risks associated with it.

At Credico Capital, we seek to help businesses within the UAE, mitigate risk by equipping them with credit guarantees for both individual accounts or their entire portfolio of customers. Our goal is to support our clients at all stages of the business lifecycle and minimize the risk of unexpected customer bankruptcy. Contact us today to learn about our service and how we can help your business move forward.

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Trade Credit Guarantee

Understanding Trade Credit Guarantee

As mentioned, the primary function of trade credit guarantee or trade credit insurance is to protect sellers against buyers that run the risk of non-payment due to economic or political factors. With credit insurance, the seller shall receive a percentage of the outstanding debt, if the buyer is unable to pay or pays very late.

Commercial Risks

Economic or commercial risks refer to those financial risks such as insolvency or declared bankruptcy because of which your clients are not able to make the necessary payment.

Political Risks

In some instances, non-payment can occur due to factors such as political events, natural disasters, or economic downturn, that are outside the control of both the bank guarantee holder and his customer.

*Trade credit guarantee only protects the holder against potential risks that are directly connected to an underlying trade transaction.

Benefits of Trade Credit Guarantee

Businesses turn to trade credit guarantee when they either have an existing credit problem or expect one to occur in the future. However, we strongly recommend businesses to protect their assets with trade credit guarantee when the company is doing good. Listed are some of the significant reasons to avail trade credit insurance:

  • Easily replace money lost due to bad debt.
  • Facilitates business growth with security and creates an environment in which you can deal with new customers in confidence.
  • Benefit from greater customer intelligence and thereby make more calculated risk-based decisions.
  • Take the right business decisions without hesitation and improve overall operational efficiency and profitability.