I recently came across a great blog about trade credit insurance on the ICBA (International Credit Brokers Alliance) blog site I thought I would pass along. It's by Ron Doyle of Millennium CreditRisk Management. Millennium is a sister company to Cowan, and Canada's largest independently-owned specialist trade credit and political risk insurance broker.

"Having set out a profile of the needs of a small business - to protect cash flow and to ensure and maintain approved buyers - what follows are the features of a particularly attractive small business accounts receivable insurance policy:

1. Approved coverage on the majority of buyers is critical. There is little point in taking out a policy, if a number of the major buyers are excluded.

2. A quick turnaround on credit limit requests is essential. If the company requires a credit limit in place before it ships and it is depending on the insurer to evaluate the credit worthiness of the buyer, the insurer must be able to respond quickly.

3. Ensuring on-going information is provided to the insured. Credit insurers are excellent repositories of information on the financial status of buyers and are aware of developments in the economy or in a particular industrial sector. When a change in the financial status of a buyer warrants the underwriter to cancel or reduce an approved limit, the underwriter should advise the insured in order that the insured can make the decision to continue shipping without insurance, or to stop shipping because a loss is imminent.

4. Clearly describing the insured's rights and obligations in the policy. The insured must understand the policy's fine points so that the chances of claims being denied because of technical violations of the policy terms are minimized.

5. The reporting and administration under the policy must be reduced to the essential. The insurer needs to be made aware of its potential exposure to losses in a timely manner.

6. No hidden costs or as few as possible. The insured must know the cost of the policy and conversely, what will be paid under the policy, if there is a claim.

7. Prompt payment is necessary. A small business depends on legitimate claims being paid as quickly as possible to replace the cash flow that has been lost. Once all of the documentation has been provided to the insurer, there should never be a delay in payment to accommodate the underwriter.

And so, we have answered this post's title question: Yes, the needs of small business CAN be met by accounts receivable and trade credit insurance. There are specific policy qualities that work best for small business, but only if the broker, the insurer and the client work together to put a good product in place. Insurance is a contract of utmost good faith, dependent on all of the parties."