Trade Credit: A Strategic Growth Enabler in a BANI Economy

We live in a BANI economy—Brittle, Anxious, Nonlinear, and Incomprehensible. This describes today’s fragile and unpredictable business environment. Companies are facing supply chain disruptions, rising interest rates, and geopolitical conflicts. These challenges are making managing cash flow and growth much more difficult.

Trade credit is a vital tool in this landscape. It allows businesses to buy now and pay later, helping manage cash flow and maintain operations. More than that, trade credit acts as a growth enabler. It builds trust between businesses and suppliers, creating a two-way street of confidence.

However, trade credit also carries risks. Late payments and defaults can threaten stability. That’s why risk management and trade credit insurance are essential in balancing credit risk and ensuring your business thrives in today’s tough economy.

Understanding the BANI Economy and Its Impact on Business

The BANI economy describes the current state of the global business environment. Each word highlights a key challenge companies around the world are facing today.

• Brittle – Company systems and supply chains are fragile, meaning that small disruptions can cause major breakdowns. Businesses must prepare for sudden shocks and avoid overreliance on single sources.
• Anxious – Many business leaders are feeling a lot of uncertainty and fear as rapid changes and unpredictable events continue to cause havoc around the globe. This anxiety affects decision-making and long-term planning.
• Nonlinear – Events are no longer following predictable patterns, with outcomes changing suddenly and without warning. Traditional forecasting methods often fail in this environment.
• Incomprehensible – This points to the complexity and confusion businesses face as they encounter new and fast emerging risks. This makes it hard for business decision makers to understand the full picture of what’s going on around them.

Together, these factors create a volatile and unstable market. Supply chain disruptions ripple through industries, affecting companies of all sizes. Interest rate hikes add financial pressure, making refinancing difficult.

Understanding the BANI economy helps businesses adapt. It highlights the need for flexible strategies and strong risk management. Trade credit plays a crucial role in this context, offering both protection and growth opportunities.

Trade Credit as a Strategic Growth Enabler

Trade credit is more than a payment method. It’s a strategic tool that drives business growth. In today’s uncertain economy, it can help your company expand without immediate cash outlay, freeing up more working capital for you to invest and innovate.

Using trade credit allows you to take on larger orders and enter new markets. It supports scaling operations while managing your cash flow effectively. This can be a key advantage in competitive industries.

However, trade credit carries risks. Late payments or defaults can disrupt cash flow and damage relationships, which is why businesses must monitor their credit risk closely.

Practical Steps for Businesses to Safely Leverage Trade Credit

To leverage trade credit effectively, take these practical steps:

• Assess the creditworthiness of your customers by using credit reports and financial data to evaluate risk. Regularly monitor your customers’ payment behaviour to spot early warning signs.
• Establish your credit policies. You should clearly define your payment terms, credit limits, and consequences for late payments. Communicate these policies clearly to customers and suppliers to set expectations.
• Use the latest technology systems to streamline credit management. Automated invoicing and payment tracking improve efficiency and reduce errors. Data analytics can help identify trends and optimise your credit decisions.
• Integrate trade credit into your overall financial strategy. Use trade credit to support expansion while protecting your cash flow.
• Most importantly, make sure you engage with a specialist trade credit insurance broker who can help you with all of these steps.

Trade credit insurance policies like Marsh Credit Plus help you manage credit risk by providing vital protection from customer non-payment.

Managing Risk with Trade Credit Insurance

Trade credit insurance is an essential coverage for any business trading on credit terms. It protects your business from losses caused by customer non-payment, helping you maintain financial stability even when buyers fail to pay on time or default.

For small to medium-sized enterprises (SMEs) with annual turnovers up to £15 million, solutions like Marsh Credit Plus offer tailored protection against the risk of non-payment. Marsh Credit Plus is designed specifically for SMEs trading on open credit terms, whether supplying goods, services, or operating in contracting environments.

Marsh Credit Plus offers competitive pricing, fixed annual premiums with flexible payment options (monthly or quarterly), and inclusive debt collection services at no extra cost. This allows you to focus on growth without the distraction of chasing overdue payments.

Marsh Credit Plus also offers an additional benefit of a £10,000 discretionary credit limit as standard and political risk cover on all export markets. You can easily manage your credit limits and claims through an online portal.

Contact us for more information on how to better manage credit risk in your business, or to discuss how Trade Credit Insurance can safeguard your business and empower your expansion in today’s challenging economy.