Protect your business from the one invoice that could change everything
A profitable business can still get into serious trouble if a major customer doesn’t pay. It only takes one large insolvency or one customer that simply can’t settle what they owe to wipe out months, sometimes years, of profit. If a significant proportion of your turnover comes from a handful of customers, that isn’t an unlikely scenario – it’s a commercial risk that every business owner should understand.
Bad debt protection helps remove that risk. Rather than hoping your customers remain financially healthy, it gives your business protection if one of them becomes insolvent or fails to pay.
At Able Commercial Finance, we help businesses find the right bad debt protection for their customer base, sector and trading model, making sure you aren’t paying for cover you don’t need while ensuring the risks that matter are properly protected.
Bad debt protection, sometimes known as trade credit insurance, protects your business if an approved customer cannot pay what they owe because they become insolvent or, in some cases, because payment has been outstanding for an agreed period.
If a valid claim is made, the insurer typically pays a percentage of the outstanding debt, helping protect your cash flow and limiting the financial impact on your business. There are two main ways policies are structured:
This protects all eligible customers within your sales ledger. Because the insurer spreads the risk across your entire debtor book, premiums are often lower than insuring customers individually. It is also simpler to administer, making it a popular choice for businesses with a broad customer base.
Some businesses only need protection for a small number of customers.
If two or three clients account for a significant proportion of your turnover, it often makes more sense to insure those individual accounts rather than your entire ledger. This gives greater flexibility while focusing protection where the financial exposure is greatest.
Every policy works around approved credit limits. The insurer will assess each customer you trade with and allocate the maximum amount they are prepared to insure. As long as your outstanding invoices remain within that agreed limit and you comply with the policy conditions, cover remains in place.
If your exposure grows, the limit can often be reviewed and increased. Equally, if the insurer believes a customer’s financial position has deteriorated, they may reduce or withdraw that limit. Managing these credit limits is an important part of making sure your protection remains effective.
Bad debt protection is designed to protect genuine credit risk. It doesn’t usually cover situations where a customer disputes the quality of your goods or services, contractual disagreements, fraud or invoices that fall outside the terms of the policy. Understanding these exclusions is just as important as understanding what’s covered.
Not every business needs bad debt protection, but for many companies it’s one of the simplest ways to reduce financial risk.
It’s particularly suitable if:
A small number of customers account for a large percentage of your turnover.
If losing one customer would significantly affect your business, it’s worth considering.
Not every insurer approaches risk in the same way. Premiums, credit limits and claims processes differ. Even the sectors insurers are comfortable supporting can vary significantly.
That’s why we don’t simply obtain a quote and leave you to compare prices.
As an independent commercial finance broker, we assess your customer concentration, your industry, your trading history and your existing funding arrangements before recommending the most appropriate solution.
If you already have invoice finance, we’ll also look at whether bad debt protection can be integrated into your existing facility, potentially simplifying administration and reducing overall costs.
The right policy isn’t always the cheapest one. It’s the one that provides the protection your business would actually need if the worst happened.
Every business has a different level of exposure, so we start by understanding where your risks are.
1. Understand your business
We review your customer base, debtor book, payment terms and identify where your biggest financial exposures exist.
2. Compare the market
Using our independent panel of insurers and providers, we compare policy structures, pricing and credit appetite.
3. Recommend the right protection
We explain the differences between whole-turnover and selective cover, helping you choose the option that best suits your business.
4. Ongoing support
Businesses change. Customers grow. Risks evolve. We’re here to review your protection as your business develops.
Bad debt protection is suitable for businesses in all industry sectors, from property to finance to health care.
Insurers regularly review the financial strength of businesses they insure. If a customer's credit limit is reduced, we'll help you understand the impact and discuss the options available, whether that's requesting a review, reducing your exposure or considering alternative arrangements.
Yes. In fact, many invoice finance providers either include bad debt protection within their facilities or offer it as an optional addition. We'll help you understand which approach provides the best overall value.
Premiums depend on factors such as your turnover, industry, customer profile, payment terms and claims history. For most businesses, however, the cost is relatively small when compared with the potential financial impact of a significant bad debt.
No. Policies are designed to protect against insured credit risks such as insolvency or qualifying non-payment. Disputed invoices, contractual disagreements, fraud and certain other situations are normally excluded, so it's important to understand exactly what your policy covers before you rely on it.
