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How businesses can survive high interest rates & non-payment risk

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By Liam J. Duffy , 

Global Clients Group Leader, Credit Specialties, Asia Pacific

11/20/2023 · 3 minute read

Businesses operating in today’s inflationary and high interest rate environment seek cash flow certainty, lower cost of borrowing, and greater access to financing. Financial institutions are currently adopting a more prudent approach in approving loans, often accompanied by higher interest rates[1]. These trends can leave your business’s balance sheet highly vulnerable on four fronts:

  • Late payment or payment default from clients.
  • Potential inability to pay invoices and debt owed.
  • High cost or inability to roll over existing debt.
  • Tight cash flow, hindering expansion. 

With your finances potentially under threat from a single incident, such as the non-payment of a large invoice, your business must not only find a way to mitigate risk but also secure access to financing at competitive terms in times of need or when an opportunity is there for the taking.

To address this, there is a win-win solution in the form of trade credit insurance that can help — regardless of your business’s size, scale and sector.

How trade credit insurance can improve your access to credit (and more)

While trade credit insurance is mainly used by a business as protection against client payment delays, or defaults, it can also serve a broader role as a valuable financial tool in a high-interest rate environment. Here’s how it works: When your business insures its receivables base, lenders (e.g. banks) can take your receivables as a security and typically proceed to extend a higher loan amount and/or at more favourable terms as your business is now regarded as being in a more financially secure position.

Let’s look at a hypothetical example of how trade credit insurance can help a company obtain a larger business loan at a more favourable interest rate*.

*Subject to individual company’s credit ranking and lender’s discretion.

Insuring your receivables not only enhances your company's creditworthiness, by providing lenders with added confidence, it can also improve its standing among prospective business partners and investors. Meanwhile lowering the cost of loans potentially frees up funds that can be channelled towards business development, technology upgrades, or market expansion.

Reap the multiple benefits of trade credit insurance with Marsh Asia

Building a successful business amidst a challenging economic environment requires proven solutions as well as a trusted partner for advice and guidance. With a global network of more than 400 dedicated and award-winning trade credit specialists spanning 52 countries, Marsh has helped over 1,500 companies in Asia — from small-medium enterprises to large corporations — obtain competitive and cost-effective insurance coverage mitigating a spectrum of risks.
 

[1] Global Finance. (2023). Tighter Credit Hampers Global Firms.

Schedule a non-obligatory chat with a Marsh representative today to find out what trade credit insurance can do for you beyond protecting your balance sheet.

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