Trade credit insurance
Insurance that pays out part of an unpaid invoice if a covered customer can't pay because of insolvency or prolonged default.
Insurers set a cover limit for each insured customer, and the seller has to report overdue balances within the policy's deadlines to keep that cover.
It lets companies extend credit to larger or riskier customers, and insured receivables are often easier to finance.
Related terms
- Trade creditCredit one business extends to another by delivering goods or services now and accepting payment later, on agreed terms.
- Credit limitThe maximum outstanding balance a business lets a customer carry before new orders are held or reviewed.
- Bad debt expenseThe cost of receivables a business doesn't expect to collect, recognized as an expense on the income statement.