Debtor Insurance protects a firm’s sales ledger by insuring up to 90% of any bad debts, both in the UK and internationally, suffered as a result of customer insolvency or the non-payment of invoices.
About one in every 50 businesses will fail this year alone, with tens of thousands of insolvencies predicted over the next 18 months as a result of poor cash management, according to a report by BDO Stoy Hayward.
Simon Featherstone, managing director of Lloyds TSB Commercial Finance, said: “Even the strongest companies can be significantly affected if a major customer suddenly fails. One bad debt can have a dramatic effect on a firm’s balance sheet and wipe out years of hard work.
“A £5,000 bad debt can create a loss that could require £50,000 of turnover for the business just to stand still. We’re seeing more demand from SMEs for a safety net and launched the scheme to meet this need.”
As well as being available online to Lloyds Banking Group customers, it can also be used by non Lloyds Banking Group customers and all firms that sell to other businesses on unsecured credit terms, as long as they have more than one customer and an anticipated turnover of more than £200,000.
The scheme includes a credit monitoring service which alerts businesses to changes in the circumstances of their customers, so they can identify a potential risk before it becomes a bad debt. Companies are also able to interactively manage the facility online and request limits on their customers.
If cover cannot be provided on at least 55% by value of a customer ledger within 30 days, the insured will be offered a full refund. The service also allows 30 days notice to be given at anytime to cancel the policy.
If a customer grows by up to 20% beyond what was originally estimated, no additional premium will be required.