COVID19: Invoice protection reduces business risk

2 mins read

Eurivex Trade Finance Ltd (ETFL), the alternate funding provider through invoice discounting, is providing small-to-medium sized enterprises (SMEs) protection for 90% of all invoices issued on credit.

As thousands of SMEs gradually resume operations following the lifting of government restrictions due to the Covid-19 pandemic, one of the critical issues confronting SMEs aside from health and hygiene issues is how to protect the business from potential insolvencies of customers.

The majority of SMEs have huge exposure to potential bankruptcies of their customers who have piled up debt prior to the pandemic and are now unable to pay their obligations or will potentially be asking for easier credit terms.

Considering that one of the biggest assets of an SME is its trade receivables, which in most cases are unsecured, then one can understand the huge risk that SMEs are running by leaving such a huge exposure to luck, hoping that none of their customers will go bust.

Easy and fast way for protection

Eurivex Trade Finance proposes easy and inexpensive solutions to put to rest such concerns, mainly invoice protection.

ETFL provides 90% of the invoice value protection through its association with Euler Hermes, the global credit insurer.

Credit insurance can be selective or a whole ledger. This means a business can choose which customer invoices to protect.

It can be for outstanding balances ranging from a few thousand to several million euros.  The fees are competitive and an average 0.5% of the invoice value.

In addition to the protection, customers may also ask for immediate funding from ETFL through the invoice discounting service whereby up to 85% funding is provided on assigned invoices.

The balance, less the relevant fees, is transferred to the business after the customer settles the invoices.

In the event that the customer becomes insolvent, the risk on the SME is restricted to 10% as ETFL will submit a claim with Euler Hermes and receive 90% of the invoice value.

Once this is settled, the remaining balance is also transferred to the SME, after deducting the agreed fees.

SMEs may also appoint ETFL with the task of debt collection, at a fee.

“ETFL has simplified the procedures and can respond within a few days on whether a client can secure credit insurance, provided there is no prior bad credit information or history on such clients,” said ETFL CEO Shavasb Bohdjalian.

Invaluable information

Through ETFL, an SME can also gain invaluable insight into their customer’s financial health as they will be able to assess the risk of doing business with such customers.

“If ETFL relays the information that full credit insurance, as requested by the SME on specific customers is granted, then this is a major vote of confidence in the customer’s financial strength and will encourage the SME to increase its business with such customers,” said Athos Kyranides, trade finance consultant to ETFL.

If a lower credit insurance limit is secured or declined, then this will allow the SME to make a proper evaluation of its risk exposure to such customers.

Kyranides added that ETFL will assume all the procedures of securing such invaluable information without burdening the SME with any red-tape or paperwork.