Why it is better to take out credit insurance separately from factoring contract
We generally recommend placing credit insurance with the credit insurer and not with the factoring company, i.e. separately from the factoring contract. Why?
- Chance of lower funding ratio
The factoring company's credit insurer often issues one limit for the factoring company. The factor company distributes it to various suppliers who are customers of theirs. If there is no or insufficient room left within the credit limit, the factor company will provide less or no cover, i.e. no financing. - Chance of lower limit if factor company wants to provide less funding
A factor company generally bases funding on a percentage of the limit on a particular debtor. If you also place credit insurance with the factor company and they want to provide you with less money, they can simply reduce the limit on your debtor. You have no say in this. - Often no possibility for tailored terms
Insuring through the factoring company means you are bound by the terms of the group contract. This means that it is often not possible to include provisions specific to your company. - Not the best conditions
The factor company does not always have the best conditions. - Factor company may not be the best credit insurer for you
The factoring company places credit insurance with a specific credit insurer. This is certainly not always the best credit insurer for your business or industry.
Want to read more about spreading finance? At the article by Fred Soers read about the benefits of 'stacking' financing.
Want to know more?
Xolv is all-round when it comes to credit insurance and factoring. Therefore, we can perfectly advise you what is best for you. Contact our specialists and we will make sure your business is optimally insured and financed.
