Businesses may choose to insure sales invoices, also known as accounts receivable insurance, to protect themselves against the risk of non-payment by their customers. The insurance policy provides coverage for unpaid invoices due to events such as customer insolvency, bankruptcy, default, or protracted default.
Here are some reasons why a business may need invoice insurance:
Protect against bad debt: If a customer defaults on payment, it can have a significant impact on the cash flow of the business, especially for small businesses that rely on a few key customers. Invoice insurance can help protect the business against the risk of bad debt and ensure that it has the cash flow to continue operating.
Expand customer base: With invoice insurance, businesses may be more willing to extend credit to new or existing customers, as they can reduce the risk of non-payment.
Obtain financing: Some lenders may require businesses to have invoice insurance in place to obtain financing, as it reduces the risk of non-payment and provides assurance that the receivables are insured.
Peace of mind: Invoice insurance can provide peace of mind for business owners and reduce the stress and uncertainty associated with the risk of non-payment.
Overall, invoice insurance can be a valuable tool for businesses to manage their credit risk and protect their cash flow. It can help businesses operate with confidence, knowing that their receivables are protected against the risk of non-payment.
