Credit Insurance Mark1199 Coverage And Financing In Times Of UncertaintyUncertainty. This is the term that best defines the situation we have been experiencing for more than a year and a half, when the crisis caused by the pandemic put the business fabric between a rock and a hard place.
The difficult situation in which both large and small and medium-sized companies find themselves is an unequivocal symptom of an economic slowdown that will foreseeably experience an increase in business delinquencies when government aid ends.
In fact, the Bank of Spain already warned in August last year of a high probability of default in one out of every three Spanish companies . A revealing figure that highlights the fragility of the economy. Credit Insurance Mark1199 Coverage And Financing In Times Of Uncertainty
Whether it happens or not, the truth is that uncertainty is not a good travel companion, especially in business, and if we have learned any lesson from previous crises, it is that giants also fall apart because no one is too big to fall. In any case, there are tools to minimize this insecurity and to be able to continue on the path of growth, even in difficult times.
A clear example is credit insurance, a financial instrument that protects organizations from the risk of default of their clients, both national and international. Although Spain is a mature market compared to other countries, this tool is still not fully integrated into the business fabric, with a reduced penetration share.
This means that most companies are not protected against possible defaults , exposing the continuity of their business to business decisions of a third party. Furthermore, if we consider that 25% of corporate bankruptcies are related to customer defaults, the scenario is even more alarming.
Change of perspective: from spending to investment
Faced with a situation like the current one, it is of special relevance that companies become aware of the need for credit insurance and transform the idea of spending to conceive this policy as an investment in protection against unforeseen events that do not depend on oneself.
But, above all, credit insurance must be considered as a tool with very clear utilities, such as providing information on the solvency of clients, both active and potential; the ability to recover for those defaults that could not be avoided or, in the event of non-recovery, compensation. In addition, it allows access to more and cheaper financing by having the collection rights guaranteed, something fundamental in a scenario of bank contention.
Therefore, in addition to preserving the balance and increasing cash flow and the ability to request financing, credit insurance also stands as an excellent ally when opening new business relationships, as well as improving payment conditions with customers. customers.
In other words, it provides the tranquility and well-being so necessary in a business , allowing the sales-billing-collection chain to develop without headaches, something essential for the sustained growth of the company. Credit Insurance Mark1199 Coverage And Financing In Times Of Uncertainty
Lifeguards of many companies
It is inevitable to remember that more than 200,000 Spanish companies had to close during the first three quarters of 2020, as confirmed by the National Institute of Statistics (INE). A trend that is not improving, since business insolvencies grew 94% in the first five months of 2021, according to Iberinform.
We are in a very complex scenario, with inflation, instability in employment due to the conversion of ERTE into ERE, a huge debt that will punish the State’s finances , plus a structural deficit significantly above European requirements that will surely lead to a tax increase and a decrease in disposable income, which will penalize consumption.
While it is true that it is extremely difficult to quantify the number of companies that could have met their obligations if they had credit insurance, it would undoubtedly have been a great relief in many cases.
Going back to the beginning, and like all good stories, despite being surrounded by uncertainty and negative signs and not being able to avoid the storm, it is possible to minimize its effects using the tools available to reduce risks . Therefore, investing in financial health should be one of the avenues to explore.
The Great Writer and The Passionate Poet As Well, He Graduated from University Of Florida in Journalism and Brad have around 12 years of experience in news and media section.