Trade Credit and Surety Bonds

Trading places and covering the risk

The Arthur J. Gallagher trade credit insurance practice can provide tailored insurance solutions to protect your business against trade risks such as the insolvency of a key customer (liquidation, receivership or bankruptcy), payment default or continued non-payment by customers, or even political risks including contract frustration, export restriction, currency inconvertibility and exportation. 

Trade Credit Insurance: what is it?

Trade Credit insurance protects manufacturers and service providers from the risk of non-payment, covering their losses if a debtor defaults on payment (such as through bankruptcy or insolvency) or settles their invoice significantly beyond the expected payment period. Similarly buyers sometimes opt for a bankruptcy protection arrangement, which allows them to delay payments for an extended period.

Trade Credit Insurance policies are generally flexible and allow a policyholder to cover all or part of their portfolio. You may also wish to consider the impact of political risk when considering trade credit insurance, especially where there is a perceived risk of non-payment by foreign buyers due to political unrest and/or economic and currency related issues.

Benefits include:

  • Improving the confidence and security of your financial partners
  • Improved cash flow - also helps to manage credit risk
  • Growing your business with confidence
  • Supporting and enhancing your own credit management
  • Ability to lower your bad debt reserve, managing write-offs with increased certainty
  • Reduced risk of financial loss.

Surety Bonds: the basics

A surety bond is a three-way obligation between a Principal (you), the Surety or guarantor (Arthur J. Gallagher) and the Obligee (Government or Corporate entity), the party look

Surety bonds are a viable alternative to bank guarantees or letters of credit, improving the liquidity of your business by freeing up bank lines for working capital and possible acquisition financing.

What's involved

There are two classifications or surety bond

  1. Contract Bonds - secure performance and contract related obligations without having to provide financial or collateral based security.
  2. Commercial bonds - essentially covers the types of bond that fall outside of the Contract Bonds classification.

If you are unsure which class of bond fits your requirements, get in touch - +61 8 6228 1142.

Benefits include:

  • A bona fide alternative to bank guarantees and retention monies
  • Improved liquity and cash flow
  • Used and recognised in major trading countries, world-wide
  • Supporting and enhancing your own credit management
  • Opens up new business opportunities through the transfer of risk
  • Assets not tied up as security.

 

Have questions on trade credit insurance? Let's talk.

Call +61 8 6228 1142 and to speak to a member of our Trade Credit and Surety team. Alternatively, complete the form opposite and we'll get in touch at your preferred time.

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