Can I get financing with trade credit insurance?

Yes. Funders can rely on the insurer's credit instead of underwriting each customer, which is what lets an insured pool of receivables reach securitization pricing. Invoice Ledger turns the policy into a funding program and runs it.

Do I need trade credit insurance to work with Invoice Ledger?

Credit insurance is what carries the credit in an Invoice Ledger program. If you have a policy it can usually be reused; if not, it can be placed for you.

What does trade credit insurance not cover?

Disputes, credit notes, returns and invoices to customers above or outside your credit limits. A funding program sizes its advance for these, which is why the advance rate depends on dilution.

Who is the loss payee in an insured receivables program?

Usually the funding program or its funders are named as loss payee, or receive an assignment of the policy proceeds, so claim payments go where the funding is.

How trade credit insurance lowers your cost of capital

Trade credit insurance is usually bought as protection: if a customer goes bust or simply never pays, the insurer covers most of the loss. What many companies miss is that the same policy is also one of the most valuable credit assets they own. Used well, it lets funders price your receivables off your insurer, and that is what opens the cheapest rung of the funding ladder.

What trade credit insurance covers

A trade credit insurance policy covers a seller against its business customers not paying, typically because the customer becomes insolvent or pays nothing for a long time after the due date (protracted default). The main features:

Credit limits per customer. The insurer sets how much of each customer it will cover, and watches those customers continuously.
An insured percentage. Policies commonly pay a high share of the loss, often around 90%, with the seller keeping the rest.
A premium tied to sales. Pricing is usually a small fraction of the insured sales.
Conditions. You trade within limits, report overdue accounts on time and follow the policy's rules for a claim to pay.

What it does not cover matters too. Disputes, credit notes, returns and invoices to customers outside your limits are not insured. In finance language these are dilution and ineligible receivables, and any funding program sizes for them.

Why funders care about your policy

When a funder lends against receivables without insurance, it has to underwrite your customers itself, one by one. That is slow and expensive, and the cost lands in your rate.

With an insured pool, the question changes. The funder relies largely on a highly rated insurer to pay if your customers do not. That credit is strong, well understood by banks and capital markets investors, and much easier to price. The policy is assigned to the funding program, or names it as loss payee, so claims are paid where the funders need them.

From protection to funding

This is the step that matters for your cost of capital. With the credit carried by the insurer, a pool of mid-market receivables can be funded the way large companies fund theirs: through securitization. Securitization prices your receivables off your credit insurer, the way institutional investors price them. Indicatively that means single digits a year, against high teens and up for factoring.

How an insured receivables program works, step by step

You sell on terms, within your limits. Invoices go to customers the insurer covers, up to each customer's credit limit.
Eligible invoices are funded. The program funds an agreed share of insured, eligible receivables, sized for dilution.
Customers pay into the program's collection account. Cash is matched to invoices and the next batch is funded.
Overdue accounts are reported on time. The policy's conditions are met every month, so cover stays valid.
If a customer fails, the insurer pays the claim to the program. Funders are protected and your funding keeps running.

What to check in your policy

Who is covered and up to what limit. Funding follows your insured limits, so limits that match your sales matter.
The insured percentage and any first-loss amount. These decide how much of a loss the program bears.
Reporting deadlines for overdue accounts. Missing them can void cover on that customer.
Whether the policy can be assigned or name a loss payee. Most can, with the insurer's agreement.
Renewal dates. A funding program relies on cover continuing, so renewals are planned well ahead.

Reuse your policy or place a new one

If you already have a policy, it can usually be reused. The program is added to it, and your limits and history carry over.
If you don't, a trade credit insurance broker can place one. Many companies buy cover for the protection alone; funding is the second benefit of the same premium.

Invoice Ledger works with the insurance you have or places it for you, and then runs the funding program end to end. Get your rate to see what your insured receivables could cost to fund.

A note for brokers

If you place trade credit insurance, the policies you write can now carry your clients' funding as well as their risk. Invoice Ledger turns the credit insurance you place into institutional funding for your clients and pays you a referral on every funded account, in addition to your brokerage commission. See how the broker partnership works.