Have you ever walked away from new business because you were afraid it was too risky? Here are three quick stories of clients of mine that were able to avoid doing that.
The first example is a large industrial contractor that was approached by a large international company to supply materials and labor for a multi-million dollar project. The problem was that the customer didn’t want to pay for 270 days. They had 270 day payment terms. My client didn’t need the business that bad and decided to walk away. He was introduced to credit insurance and after speaking with them and understanding the need, we were able to structure a policy that would protect them and allow them to take on that multi-million dollar project, which had very good gross margins. The result is that they did the project using credit insurance to backstop the exposure, were paid and successfully booked the deal with hundreds of thousands of dollars of profit that they would have walked away from had they not been able to backstop that risk.
The second example is an equipment distributor that had always had trouble with the companies that operated out of a particular building location. Every business that they had ever sold in this location had defaulted on their payments. Another opportunity came up for about $400,000 worth of new business and my client decided to pass on it just because of the bad experience, as strange as that might sound. Because they could backstop the risk and lay off the risk on a credit insurance policy, they decided that if we could approve it, they would go ahead with the sale. We did, and they did, and they made a nice profit on the new customer relationship that they would have passed up.
The final example is a food industry client that sells to restaurants. They had a particular situation where they had payment troubles with a particular company, had backed away from taking more business with them; decided to see if we could approve them and in so doing, they transferred the risk to us (you’re picking up on a theme here!) and were able to pick up that business successfully.
So here are three examples of companies that would have walked away from hundreds of thousands, if not millions of dollars of business except for their use of trade credit insurance.
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