Credit insurance (also known as trade credit insurance) compensates businesses when customers become insolvent or default on payment. But cover isn’t just for multi-national corporations juggling numerous customers, all businesses regardless of size can benefit from protection. Here, we explore agricultural and horticultural credit insurance and how it can safeguard your farm, food, or horticultural business from financial loss.
What does agricultural and horticultural credit insurance cover?
If a customer defaults on payment or becomes insolvent, credit insurance can reimburse your business so that your cashflow doesn’t suffer.
Agricultural and horticultural credit insurance is specifically designed for businesses working in trade sectors directly or indirectly related to the food and agricultural industries.
Policies can be tailored to suit your specific needs. So, if you own a business exporting goods to Europe and beyond, you can include cover for both domestic and export customers. The war in Ukraine has caused significant economic issues for businesses worldwide, the farming industry in particular has seen the price of grain, fuel, and fertiliser skyrocket – the knock-on effects of this will be felt by the customers that you supply. Credit insurance would help you recoup your financial loss due to events happening outside of your, or your customers, control.
You can also choose your level of cover, for example, whole turnover insurance covers all of your customers with premiums based on your forecast annual turnover. Alternatively, you might decide just to cover one or a few major customers under a key customer or specific customer insurance policy.
Why do I need credit insurance?
Credit insurance is there to provide you with financial security. Policies can help secure your cashflow by minimising your financial losses if a customer fails to pay you. While everyone needs food, the agriculture and horticulture sectors aren’t immune to market shocks, global events, or supply chain issues. There may be customers that you have extended credit to for many years and therefore consider to be relatively risk-free. But how can you be sure of the creditworthiness of the companies your customer trades with? And if they did run into problems, would this affect your ability to pay your own creditors? The effect of late or non-payment by your customers and their customers can have a wide-reaching domino effect.
Policies can also benefit your business in other ways and give you:
- Financial security to expand your customer base and explore international markets.
- Better access to financing and credit as lenders are assured your cashflows are as secure as they can be.
- Access to information – insurers have valuable insights into buyers within various industries and economies, helping you make more informed decisions about risks.
How does agricultural credit insurance work?
Our exclusive agricultural credit insurance scheme can be tailored to your specific business needs. Whether you choose to insure risks based on one, some, or all your customers, is entirely up to you.
In addition, our credit insurance scheme also includes:
- Access to credit checking services, enabling you to calculate the credit worthiness of new clients.
- Free debt collection and legal services.
- A review of any existing credit insurance arrangements you may have.
Ultimately, if a customer fails to pay you for a reason covered by your policy, you can make a claim, with policies covering up to 90% of your outstanding balances. This also includes consignment stock and self-billing contracts.
Here is an example of where the credit scheme helped protect an agriculture business:
In 2017 Ely-based grain supplier Wellgrain Ltd became insolvent, owing in excess of 300 companies more than £15 million in total. Suppliers who were protected by our credit insurance scheme received the majority of their debt back, thereby protecting their cashflow. Unprotected suppliers lost the money they were owed at the point of insolvency because they were classed as unsecured creditors and had no legal recourse to recover their loss.
What other products can agricultural credit insurance complement?
Credit insurance can be taken out in addition to agriculture or farm insurance, giving you all-round comprehensive cover for a range of risks and events. To find out more and to speak to an expert about the options available to you, call us on 01223 324233.