Definition
Insurance that protects a seller against customer non-payment.
Why it matters
Some funders use it to offer non-recourse terms on larger accounts.
Where it shows up in a deal
A policy is placed either by you or by the funder, with named buyers endorsed onto it at specific limits and the funder named as loss payee. It enters a file when a ledger is concentrated, when a buyer sits above the concentration cap, or when non-recourse terms are being negotiated on larger accounts.
What it affects
- Cover is usually what makes a non-recourse structure or a raised concentration cap possible.
- Limits are per buyer and hard - shipments above the endorsed limit are uninsured.
- An insurer can reduce or withdraw a buyer limit, and that applies to future shipments.
- Premium, deductible and the co-insured share all reduce what a claim actually returns.
A worked example
A policy covering 90% of an approved loss with a $25,000 deductible: a $300,000 insolvency produces a claim of ($300,000 - $25,000) x 90% = $247,500, leaving $52,500 uncovered before premium is counted.
The common mistake
Related terms
- Non-Recourse FactoringFactoring where the factor absorbs losses if an approved customer becomes insolvent.
- Concentration LimitA cap on how much of a facility can be tied to a single customer.
- DebtorIn factoring, the customer who owes payment on the invoice.
- Full-Recourse FactoringFactoring where the business must buy back invoices that customers don't pay.
Questions about how credit insurance affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
