What is Bad Debt Protection for Invoice Finance?

Cashflow can be incredibly unpredictable in even the most successful businesses, so, understandably, many companies turn to Invoice Finance to release the value of unpaid invoices. But what happens when you receive the money from the invoice in advance and the customer doesn’t pay? What can you do about it and when should you take action in order to protect your business?

For many businesses, the answer is to choose Bad Debt Protection before this happens. It supports companies who are using Invoice Finance and who want to safeguard against non-payment.

What is Bad Debt Protection?

Bad Debt Protection, is a financial tool designed to shield your business from the potential losses associated with customer insolvency or non-payment. When used as part of an Invoice Finance facility, this protection ensures that even if your customers fail to pay their invoices, you won't bear the brunt of the financial impact.

How does Bad Debt Protection work with Invoice Finance?

When you start using Invoice Finance it is likely that your provider will talk to you about protecting your business from non-payment. The areas that will likely be discussed with you are:

1. Risk. Before providing Bad Debt Protection, your provider will discuss which customers you wish to cover. You may be able to choose to cover all or some of your customers.
2. Protection levels. Your provider will advise you what level of protection you can expect i.e. what percentage of the owed invoice you will receive in the event of non-payment, usually up to around 90%.
3. Cost. The cost of protection is influenced by factors such as the creditworthiness of your customers, the industry you operate in, and the coverage percentage.
4. Process. If a customer defaults on payment, you can seek payment from your provider. The provider will give you the covered portion of the outstanding invoice, mitigating the financial impact of the bad debt.

Why is Bad Debt Protection essential for businesses using Invoice Finance?

When you partner with a provider like us, you make an informed business decision to enhance your cashflow stability. Bad Debt Protection is an extension of this service, as it protects you from non-payment and allows you to plan for growth. You have the confidence that, in the event you do not receive payment from a customer you will be repaid, allowing you to invest in your business rather than hold considerable cash reserves to support you with unexpected impacts on your cashflow.

Bad debt is also extremely unpredictable, as each of your customers will be facing their own unique challenges in the industry they operate in. Managing cashflow is a challenge globally for businesses, and it is fair to assume that you will face non-payment at some point.

When you face it, it pays to have Bad Debt Protection in place as you will still receive payment and your cashflow will not be effected. It can also give your business more confidence regarding the risk associated with providing goods and services on credit terms.

Above this, running a business is challenging, and concerns over a large client not paying can put unwanted pressure on you and the company. A common knock-on effect is the time and distraction resolving bad debt causes – taking time away from proactive activities and opportunities for growth. Bad Debt Protection is peace of mind, which is priceless.

Bad Debt Protection stands out as a valuable ally for businesses that use Invoice Finance. It safeguards against unforeseen financial setbacks and empowers you to confidently pursue growth opportunities for your business. If you choose invoice finance to support your business cashflow, consider incorporating Bad Debt Protection into your financial strategy to ensure a resilient and secure business future.

Don’t let the threat of non-payment stem your business growth. Explore Bad Debt Protection today to protect your cashflow and take your business to the next level. Call (01) 506 0194 or fill in an enquiry form here to arrange a callback.