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As government support during the COVID-19 pandemic is phased out, insolvencies in most markets are projected to increase in 2022 and 2023. C&C Insurance Broker’s Paul Jackson explains how Credit Insurance could save your business from falling into the same insolvency hole.
During the pandemic, we saw a strong decline of insolvencies. The UK, and other countries, made changes to their insolvency legislation to protect companies from bankruptcy. Governments worldwide also introduced measures to counter pandemic-related adverse economic effects, including financial support for all businesses, particularly smaller businesses.
The predicted increase of insolvencies is partly due to so-called ‘Zombie’ companies, those companies that would have probably gone bust during the pandemic but chose to take advantage of government funding and insolvency legislation, so continued to “trade”. Companies House also effectively stopped strike-offs for any companies with a Bounce Back loan, providing further protections for Zombie companies.
Many of these Zombie companies are expected to return to their financially insolvent position during the latter half of 2022 and into 2023 and so head for bankruptcy/liquidation/administration or similar, putting solvent companies at risk, through no fault of their own. A company’s biggest asset is its cashflow so customers not paying their invoices can have devastating effects.
Credit insurance offers protection against losses arising from non-payment of goods or services sold on credit terms due to a customers’ insolvency or failing to pay within the agreed payment terms. If you are concerned about any of your customers not paying for what you have provided and you haven’t already taken out Credit Insurance, I would strongly recommend that you take advice to protect you and your business.