Insurance against client failing to pay

[BrowneIssue]

are you not better off using an agent and spreading the risk?

But when it is the agent that goes bust...

[Not So Wise]

To me, the agency factoring aspect of the invoices is probably the most valuable part of the contractor/agency relationship.

This.

Actually it is only thing in my mind that justifies their normal rates, which is one of the reasons why I never take a contract with an agency that has stupid terms like pay only after client pays or pay 30 days after invoice because those terms mean agency is getting paid for pretty much nothing. Only way I would accept those terms is with an agency commission of about 1 to 2%

[TykeMerc]

Perhaps not commercial, but AIG sold insurance in the form of Credit Default Swaps - basically insurance against mortgage holders not paying their dues.

I wonder how that worked out...

I'm sure it's available, but I bet it will cost a packet right now.

A CDS wasn't produced to cover commercial invoices, at least in theory there was an asset supporting the debt , however as we've all noticed that didn't pan out terribly well in the long run.

[centurian]

I'm not aware of any insurer that will cover the payment of commercial invoices, it seems unlikely that any such insurance would (if it exists) be at an attractive premium as the commercial risks are insane.

Perhaps not commercial, but AIG sold insurance in the form of Credit Default Swaps - basically insurance against mortgage holders not paying their dues.

I wonder how that worked out...

I'm sure it's available, but I bet it will cost a packet right now.

[Lewis]

This one is for my plan B.

I just wanted to explore if there are any insurers who would insure your invoices, i.e. if the client refuses to pay (assuming I have done everything right on my part) or goes bankrupt, insurer would pay. (Please dont tell me that insurer would charge the invoice amount+interest as the premium)

I doubt there will be anything like that, however I wanted to check if there are any options like as I mentioned

PCG Plus includes a limited insurance to cover agency default (but it has lots of small print!)

[Alan @ BroomeAffinity]

Google "credit insurance". You'll see there are a lot of providers. From memory it can be expensive and you are requried to jump through a lot of hoops. If you even the slightest part of the procedure wrong cover is excluded.

[BrilloPad]

To me, the agency factoring aspect of the invoices is probably the most valuable part of the contractor/agency relationship.

You mean its not the quality agent service?

[bullseye]

Yes - I have a vested interest in this (obviously) but are you not better off using an agent and spreading the risk?

Most agencies will pay you weekly, or at worst monthly on production of a timesheet and invoice - from that moment onwards, the invoice is their problem - they can't take back what they've paid you.

Just a thought.

I will now await the onslaught of abuse.

TAV

The kind of business my Plan B is, there is no luxury of using Agents. Infact, I would be the agent and most of my customers would be low turnover or medium trun over manufacturing companies (the ones who are still surviving).

Factoring could be of help but was not exactly what I was looking for. As Gonzo and TM said I would have to take this as a business risk and see how I could handle it in a way it benefits my company

[Fred Bloggs]

To me, the agency factoring aspect of the invoices is probably the most valuable part of the contractor/agency relationship.

[TykeMerc]

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

It depends what you regard as expensive really.

Consider the risks that a Factoring Company takes:-

• Their customer has or expects to have cash flow issues
• They advance funds against invoices for work that they haven't done and have no real assurance was done acceptably, if the end client doesn't pay up then they have to pursue their customer
• They either borrow the funds to Factor with or take them from company reserves
• If the customer does a runner or goes bust and the work invoiced is disputed the Factor is firmly out of pocket

I don't know about you, but even with these very basic risks which ignore such things as Export/Import duties and licences, fraudulent transactions or other illegal stuff, I wouldn't set up as a Factoring business unless I had a ton of spare cash and charged a sizable fee to cover bad payers.

Yes Agents do take Factoring risks, but their business model does differ quite a bit from standard Factoring Businesses.

There are quite a few Factor business models of course, I've only mentioned the simplest and the most common that I've come accross in the past.

[The Agents View]

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

Yes - I have a vested interest in this (obviously) but are you not better off using an agent and spreading the risk?

Most agencies will pay you weekly, or at worst monthly on production of a timesheet and invoice - from that moment onwards, the invoice is their problem - they can't take back what they've paid you.

Just a thought.

I will now await the onslaught of abuse.

TAV

[Gonzo]

Factoring assumes that the invoices actually get paid, if they don't then the Factor will expect their money back and that will be in the contract you sign with them in the first place.

You learn something new every day. They seem a bit expensive for what they do do then.

In that case, I guess it has to go down a business risk which has to be mitigated by the credit terms that you give to your customers.

[TykeMerc]

You want to google for "invoice factoring" and look at the options available there.

I understand that they pay you something like 95% of your invoice value and then collect the full amount from your client, keeping the difference.

I have never used this myself though so cannot warn you of any pitfalls.

Factoring assumes that the invoices actually get paid, if they don't then the Factor will expect their money back and that will be in the contract you sign with them in the first place.

I'm not aware of any insurer that will cover the payment of commercial invoices, it seems unlikely that any such insurance would (if it exists) be at an attractive premium as the commercial risks are insane.

[Gonzo]

This one is for my plan B.

I just wanted to explore if there are any insurers who would insure your invoices, i.e. if the client refuses to pay (assuming I have done everything right on my part) or goes bankrupt, insurer would pay. (Please dont tell me that insurer would charge the invoice amount+interest as the premium)

I doubt there will be anything like that, however I wanted to check if there are any options like as I mentioned

You want to google for "invoice factoring" and look at the options available there.

I understand that they pay you something like 95% of your invoice value and then collect the full amount from your client, keeping the difference.

I have never used this myself though so cannot warn you of any pitfalls.

[bullseye]

This one is for my plan B.

I just wanted to explore if there are any insurers who would insure your invoices, i.e. if the client refuses to pay (assuming I have done everything right on my part) or goes bankrupt, insurer would pay. (Please dont tell me that insurer would charge the invoice amount+interest as the premium)

I doubt there will be anything like that, however I wanted to check if there are any options like as I mentioned