Trade credit insurance an “opportunity” for SMEs

Trade credit insurance an “opportunity” for SMEs | Insurance Business Australia

Trade credit insurance an “opportunity” for SMEs

Trade credit insurance can be a tough pitch for brokers as coverage often seems complicated and rarely comes cheap – however, one senior figure in the field says there’s far more on the table than many SMEs realise.

Mark Hoppe, managing director of Atradius’s Oceania operations, says many SME business owners don’t fully understand the benefits that come with trade credit insurance – specifically, how it can help them reach the next level.

“Business owners do see it as an expense – and you can’t fluff around, it definitely is an expense – but trade credit insurance also provides an opportunity to grow, particularly for SMEs,” says Hoppe. “If you want to grow from an SME, you’re going to have to take some risks – but a lot of SMEs don’t have the confidence to do that because a big, bad debt can put them out of business quite quickly.”

Hoppe’s sentiments are mirrored in a 2018 report by debt recovery giant Prushka, which found that unpaid debts were the leading concern for Australian SMEs. The same study also found that 34% of SMEs reported increased difficulty in collecting debts over the past 12 months.

CEO Roger Mendelson said this was preventing many businesses from taking risks, even carefully considered ones, that could ultimately benefit them.

“SMEs are displaying a more cautious nature towards operating as they show signs of conservatism in everyday business activities,” he said.

Worryingly, the report also found that the number of SMEs with debts over $150,000 almost doubled in the second half of 2018, compared to the first.

With the issue impacting a vast number of SMEs across all sectors, Hoppe says it also serves as an opportunity for brokers to increase their value proposition.

“This really is an area where brokers can add value because it can be a complicated product - but if brokers can help their clients understand what’s on offer and see the growth they can get out of it, then they’ll be helping them take that next step,” he tells Insurance Business.