One unpaid bill... one company insolvency can trigger a chain reaction

At Coface, we know all too well that business insolvency often has a domino effect.

For every business that collapses, an average of ten more suppliers will feel the financial shock of a bad debt on their cashflow which leaves them unable to pay creditors and staff. In this way, the failure of one business can start a chain reaction.

While it’s comforting to think: “Our customers are solid”, the reality is that no business is immune from trade risk. Your cashflow may be more exposed than you realise because of another company in the supply chain. You may know your own customers but you won’t necessarily know their’s.

Credit insurance protects your cashflow in the event of a bad debt, enabling you to continue business as usual. At the same time, working with a credit insurer will give you access to the credit risk data necessary to make informed decisions and trade with confidence.

Who gets paid first when a company goes bust and how much is left for unsecured creditors?

When a company goes into administration or liquidation, its remaining assets are sold to clear as many of its obligations as possible.

1. The first payment goes to the insolvency practitioner, to pay their fees for overseeing the process.

2. Next to receive payment are secured creditors, such as banks, asset-based lenders, finance and agreement providers.

3. Third in line are preferential creditors, such as employee claims, which are subject to limits set by the government.

4. After that, come unsecured creditors such as HMRC, suppliers, contractors, landlords and customers.

5. Shareholders will only get paid if all the above creditors are paid in full.

As a supplier, you are likely to find yourself near the back of a long queue. If you don’t want to lose out, it makes sense to take matters into your own hands by obtaining a credit insurance policy.

Why Coface?

We monitor over 80 million companies in the UK and worldwide so when you ‘Coface It First’ you’ll have access to:

  • Customer and supplier credit checks on demand
  • The latest business and economic trends
  • The information you need to make informed decisions
  • The confidence to offer competitive credit terms and win more business

Frequently asked questions (and answers)

Coface UK’s Commercial Director and Chief Operating Officer, Andrew Share, answers some of the questions that business owners ask us about credit insurance:

How much does it cost?

The price of Coface Credit Insurance is set according to the turnover of a business and its profile, including industry sector, number of customers and previous loss history.

Can I pick and choose the customers I want to insure?

Yes. You don’t have to insure all your customers. If, for example, you want cover for your biggest customers or your export trade, Coface will work with you to structure a solution which meets your business requirements.

Will there be lots of extra work involved in running the policy?

A policy is designed to support your existing credit management procedures and Coface’s policy management tools make this easy. For example, you can apply online for credit limits on new customers and modify existing ones; submit overdue and claim information; and message underwriters. Nor is it necessary to submit piles of documentation to make a claim.

Is it true that credit insurers will not want to write limits on my riskier customers?

Coface works hard to support clients in writing the credit limits they require but occasionally our data shows the company represents indicates a strong risk of a bad debt. If we have to decline a limit, we will provide as much information as possible to explain the reasons behind the decision. Most companies find this credit risk information helpful because it enables them to avoid high risk customers and focus on the most financial stable.

Does the policy have a debt collection service?

Yes. Debt collection is an essential aspect of risk management but it can be very difficult and we support all clients by giving them access to our professional debt collection services. Coface has an experienced team who can often sort out an overdue payment without damaging a business’s relationship with its customer. We can also optimise risk management and provide you with access to local enforcement facilities.

Does the policy only provide cover in the event of an insolvency?

A credit insurance policy from Coface protects you against insolvencies and protracted late payment and disputed debts are also covered (subject to policy terms and conditions). Our TradeLiner policy gives you the flexibility to customise your cover to address the particular risks faced by your business eg political risk, natural disasters, pre-shipment risks

How do we make a claim and how much will we get back?

Claiming is straightforward and you can get back up to 90% of a net debt. Our dedicated client services team can guide you through the process. Once claims have been assessed and validated, they are paid within 30 days, so you can keep your business strategy on course.

Will my bank mind if I use a third party for credit insurance?

No, we work well alongside all banks and funders. What’s more, credit-insured businesses are more attractive to banks and other investors which should help you to secure better terms.

Does this remove the need for bank letters of credit? Is it cheaper?

Credit insurance is invariably more flexible and more cost effective than letters of credit which only cover a single transaction for a specified customer.

Does it cover all amounts owing to me from the date I take out the policy?

All goods sold and delivered and/or invoices raised during the policy period will be covered, subject to terms and conditions. The sooner you have a policy in place, the sooner you will be protected.

If I trade with a customer that Coface is not willing to provide cover on will it invalidate the policy?

No. Credit insurance is not intended to prevent you from trading. We have a responsibility to tell you about high-risk customers that we cannot underwrite but if you do decide to trade and then suffer slow payment or a bad debt, you can still submit the case to us and we will try to collect the debt.

What is the difference between invoice discounting and credit insurance and can they work alongside each other?

Invoice discounting is a funding solution where businesses use a third party to draw money against their invoices. Credit insurance provides protection against non-payment of these invoices. Coface isn’t an invoice discounter but we work alongside providers and funders to provide additional security for all parties. As with any kind of funding, credit-insured businesses are generally able to secure better terms.

Coface Credit Insurance is a valuable addition to your credit management toolkit. It provides access to analysts to help you avoid risk, collects debts on your behalf and, should the worst happen, replaces vital cashflow.

In these turbulent times, apparently stable companies can suddenly be critically weakened by a bad debt with potentially serious implications for their suppliers. Safeguarding your business gives you peace of mind and the confidence to trade so it makes sense to speak to the experts at Coface.


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