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Manufacturing and trade credit: Protecting your business with insurance

For many manufacturers, protecting your company from unpaid invoices could help you stay in business.

It remains an uncertain time for the sector,1 with manufacturing firms among the five industries most affected by insolvencies.

In 2023, thousands of businesses in England and Wales went bust, and insolvencies were up 10% from a year before in the three months to September 30.

With many more at risk of closing their doors, some businesses won’t be able to meet obligations to their suppliers and may delay payments to help their cash flow.

But how would your business then get paid if a customer became insolvent? 

Outstanding invoices – The domino effect

Many businesses operate on the ability to buy stock or services and pay for them later with trade credit.

However, when a firm runs out of cash and defaults on payments, the knock-on effect for businesses paid outside their payment terms could be catastrophic.

The impact of late payments can have a domino effect that disrupts multiple businesses. In the worst cases, it can lead to financial decline and insolvency for others in the supply chain.2

The risk of compromising cash flow can be very worrying for manufacturers, particularly smaller firms that cannot absorb the costs.

Outstanding invoices are one concern, with more than half (55%) of businesses having unpaid invoices from the last tax year (2022/23), according to a survey.3

The research also found business debt was getting worse, as 46% of SMEs were left with more unpaid invoices than the previous year. Worryingly, a fifth of business owners said they had outstanding invoices from four to six months prior, which could significantly impact smaller companies.3

Trade credit insurance would protect you when your manufacturing business isn’t paid due to insolvency.

What is trade credit insurance?

Trade credit insurance, sometimes known as invoice insurance, is a type of cover that protects your firm from the risk of non-payment.

It safeguards your financial stability and can reimburse you for unpaid invoices should the worst happen.

As well as protecting a steady cash flow and profitability, trade credit insurance helps you identify potential credit risks, reducing the risk of delays or non-payments.

For manufacturers wanting to borrow, it can make you more appealing to lenders, enhancing your borrowing capacity.2

It can also help you expand your customer base and trade internationally without concerns about payment defaults.

Is trade credit insurance necessary?

According to the latest official figures, 1,911 manufacturing firms in England and Wales collapsed in the 12 months ending September 30, 2023.1

The Insolvency Service said there were 6,208 registered company insolvencies in England and Wales in the three months before the end of September.1

As statistics show, those in business have faced a multitude of challenges. And the number of companies collapsing in 2023 is on track to be the highest since the 2009 financial crisis.4

Many more firms are at risk of closing their doors for good, with a sharp rise in the number of businesses at risk of becoming insolvent.

However, the impact of insolvency can go way beyond the firm that’s gone bust. Non-payments could have a long-lasting effect on the cash flow and continuity of others in the supply chain.

Challenges for manufacturers

In the past few years, manufacturers have met several challenges due to the combination of staff shortages, escalating costs, shortages of raw materials and supply chain issues. Many of these issues manufacturers have been grappling with are now thought of as a constant within the sector.5

Higher inflation and borrowing costs have added to financial pressures, along with the end of COVID-19 loans and government support, which helped many firms to keep going during the pandemic.4

However, there’s increasing optimism for businesses. In November 2023, 5% of companies with ten or more employees experienced global supply chain disruption. This was fewer than the 20% in September 2022 and is the lowest percentage reported since December 2021.6

In December 2023, the number of businesses experiencing worker shortages was 9%, with 43% of those businesses reporting they were unable to meet demands as a result.6

For manufacturers navigating challenges such as outstanding payments, trade credit insurance can protect against the risk of insolvent customers and unnecessary supply chain disruption.


Trade credit insurance offers distinct benefits, particularly in the areas of risk mitigation, growth, and enhancing working capital. In summary, for businesses in the manufacturing sector:

Risk Mitigation

  • Helps protect businesses against the default of their customers, reducing the risk of non-payment.
  • Can enhance credit management by offering insights into the creditworthiness of potential customers.


  • Helps facilitate business expansion by enabling companies to safely offer more competitive credit terms to new and existing customers.
  • Helps increase confidence in exploring new markets or expanding the customer base without fear of significant financial loss.
  • Helps secure better financing terms from banks, as insured receivables are often viewed as more secure collateral.

Enhancing working capital

  • Helps improve cash flow by protecting against late or non-payment, ensuring more predictable income streams.
  • Can lead to improved borrowing terms, as lenders may view businesses with insured receivables as lower risk.
  • Allows businesses to release capital as a buffer against bad debts, reallocating resources for growth and operational needs.

To learn more about how trade credit insurance can protect your manufacturing business, visit our trade credit page.

We will also be holding a trade credit insurance webinar in February, when leading industry experts will discuss the latest insights.

Join our upcoming webinar!

Join us on Wednesday 28 February at 10am and learn the strategies to reduce your credit risk and improve access to finance for growth.