Bad Debt Protection
Bad debt protection covers you against the unexpected. Get the best deal with ABC Finance.
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Managing business cash flow is a crucial factor in running an SME.
You can keep your finances stable and ensure they’re protected against payment delays or missed payments using bad debt protection alongside your invoice finance facility.
No matter the performance of your business, unpaid invoices can have a major destabilising impact on the financial controls that you have in place.
Bad debt protection can offer a solution that can protect your business against the impact of customer non-payment and even customer insolvency.
What is bad debt protection?
Bad debt protection is a financial product that can be added to an invoice factoring or invoice discounting facility. It acts as an insurance policy that ensures that your invoices are still settled in full if your customers fail to do so.
While this is an add-on product, it often sits as part of your existing finance agreement and is paid for by a small interest in the existing fees in your facility.
How does it work?
It works by paying your invoices in full if your customers fail to settle their invoices.
Bad debt protection can offer cover up to 100% of the invoiced amount, subject to your customers being deemed creditworthy by your provider.
Each customer is credit checked to assess their financial strength.
What are the key benefits of debt protection for your business?
The key benefits of bad debt protection for your business are:
- It’s simple to set up – Protection can be set up in just a few days when it’s added to an existing agreement. For new facilities, it takes no additional time to protect your sales ledger.
- It’s low cost – The cost of protection is very low compared to the peace of mind offered and countless hours saved in the event of customer insolvency.
- Protects your business cash flow – Business cash flow is key and bad debt protection is in place to protect it. You can benefit from up to 100% protection, subject to the creditworthiness of your customers.
- Peace of mind – The peace of mind offered by protecting your business allows you to relax and focus on the success of your company, without worrying about invoices being paid.
What are the drawbacks of protecting your accounts receivables?
The drawbacks of bad debt protection for your business are:
- There is a cost – While a policy is low cost, there is still some cost to consider.
- Not every customer will be acceptable – Customers that fail to meet the lenders criteria may be eligible for a lower, or even no credit protection.
Is it right for my business?
If you feel that non-payment of even a few invoices could have significant consequences, then bad debt protection could be a perfect fit for your business.
To decide, you should consider the cost of additional protection vs the risk of missed payments and the impact on your cash flow.
Will my business be eligible for bad debt protection?
If your business operates on delayed payment terms to other businesses, then there is a great chance that you’ll be eligible.
As mentioned above, the key to the success of your application will be the creditworthiness of your customers.
Keep reading – Dealing with late payments or Asset based lending.
What is the best way to get invoice finance with bad debt protection?
The best way is to get invoice finance with bad debt protection is to compare offers from different providers to ensure that you get the best deal.
The simplest way to do this is through the ABC Finance invoice finance comparison tool.
Simply input your details and have the leading providers compete for your business and offer you the best prices.
Each quote is uploaded to our secure platform for you to review, and no lender has your contact details or consent to contact you, unless you specifically choose to give them.
