From the January 2009 issue of Investment Advisor • Subscribe!

Creditworthy

Sidebar to Insurance Update article: "Extra Credit"

Peter Seneca, a partner at Securitas Global Risk Solutions LLC in Berwyn, Pennsylvania, says that credit insurance, in addition to protecting the receivables of a business, can function as a tool to offer businesses opportunities for growth that they might not otherwise have--a benefit that can prove very welcome in a time of tightening credit and tough conditions.

Coverage, he explains, can "help companies finance assets that banks won't traditionally finance, such as foreign receivables." Credit insurance can also allow a company to increase credit limits to some large clients without increasing their exposure, thus allowing the opportunity for greater sales and larger transactions. "We help people sell more than they would otherwise," Seneca adds, "by helping them transfer credit risk."

Companies using this type of coverage as a tool can also "go international" by having the ability to extend open account terms instead of operating under the constraints of a conventional commercial letter of credit; this provides more flexibility on both ends of the transaction and opens up opportunities that might otherwise go unnoticed.

Credit insurance is a product, says Seneca, that can serve a company on many different levels: It provides risk mitigation and financing; it can help a company grow its sales or its top line; and it can act as an alternative to a commercial letter of credit.

Reprints Discuss this story
This is where the comments go.