It is important to have alternatives to mitigate risks for your business. In this context, trade credit insurance can be the best choice.
Since 2020, the world has been experiencing an unprecedented situation. The covid-19 pandemic, which continues to alarm the population – as indicators have risen again in Europe, indicating a global trend – has resulted in impacts in the most diverse sectors, especially in the economy.
In 2020, the first year of the health crisis, the Brazilian economy contracted by 3.9%. Although, in general, the country managed to overcome the negative expectations around the GDP (Gross Domestic Product) growth – with an advance of 4.6% in the following year -, there is still much to be done to effectively get out of the situation of economic insecurity.
The president-elect, Luiz Inácio Lula da Silva, has already signaled the fiscal measures he intends to adopt and left the market astonished with the possibility of a PEC (Proposal of Constitutional Amendment) to leave out of the spending cap of approximately R$175 billion reais. Therefore, the expectation is that the BC (Central Bank) will increase the Selic rate considering a potential fiscal worsening.
The fear of an increase in the interest rate, as well as an inflationary risk, may reflect negatively on the growing expectation of the Brazilian economy. In times of insecurity, it is important to count on alternatives to mitigate risks for your business. In this context, trade credit insurance may be the best choice.
Trade credit insurance in times of economic uncertainty
Companies have trade credit insurance to protect themselves against the risk of non-payment when selling goods and services on credit terms. If a customer (debtor) does not pay within the agreed time and has complied with the terms of the policy, the insured company (creditor) files a claim with the insurer to obtain payment.
Credit insurance can and should be contracted by companies that export and want to protect their cash flow. For example, the coverage can provide assurance about an international customer’s ability to pay due to trade and political instabilities. Take for example the war between Russia and Ukraine and the economic risks that the situation poses.
This type of insurance protects your business from risks that are beyond your control. As well as minimizing the chance of default, it gives you the confidence to extend credit to new customers and improves access to finance, often at lower rates. Therefore, your company can become more competitive in the market.
With default rate breaking records in Brazil, with 68.4 million people in this situation, according to data from Serasa Experian, preventing your business from potential losses is better than waiting for the situation to improve.
Want to know more about trade credit insurance? Talk to Pryor Global. We are committed to providing our clients with the best products available on the market. Our experts are ready to discuss the benefits of the insurance products we offer.