In the current economic climate bad debt protection or credit insurance will provide much needed protection and comfort should any of your customers go bust. However not all factoring companies offer the same level of protection. Therefore when choosing a factoring company it is important that you take this into consideration.
It must also be remembered that most most insurance and bad debt protection will only pay out when a customer goes bust. If for some reason your customer wont pay or can’t pay but hasn’t gone bust then it wont pay out. This is worth bearing in mind.
A bank based factoring company may provide insurance from their own in house insurance company. This may be provide a blanket insurance cover if their are any future problems. However this may be further complicated by the exposure to any one customer. If your exposure is more than say 20% for one customer than credit insurance may be restricted.
An independent factoring company don’t use their own in house insurance but use independent insurance agencies and as such different funders may use different insurance companies and as such levels of insurance from one company to another may vary considerably. It all depends on what their experiences are in varying sectors.
Therefore worth gettting an independent factoring broker to search the market
Tags: bad debt protection, Factoring
