Government broadens its trade credit insurance scheme

The government has amended its trade credit insurance top-up scheme so that more businesses can take advantage of it.

The scheme was introduced to help those firms that were struggling to find sufficient insurance cover to safeguard themselves against customers defaulting on their payments.

Under the scheme, which is due to run until 31 December 2009, suppliers who have seen their cover reduced can buy six months of government-backed insurance either to restore cover to the original level or to double the amount they are able to obtain from the private sector up to a set maximum.

Research carried out by the government has suggested that businesses are adapting to reductions in their insurance by managing their credit risks more actively. This has lessened their dependence on the scheme.

However, a number of businesses have not been eligible but they have also needed the time to adjust to reductions in their cover.

To provide them with some extra breathing space, the government has introduced three changes to the scheme.

Where a business has seen a reduction in its credit insurance since 1 October 2008, the scheme now provides six months top-up cover at a price of 1 per cent rather than the original 2 per cent.

The old lower limit of £20,000 has been removed. While the former upper limit of £1 million has been increased to £2 million.

To use the scheme, businesses should contact their trade credit insurer.