Delinquencies on the Rise – Small Business Needs Protection

Published: Tue 16 Aug 2011 02:55 PM
Delinquencies on the Rise – Small Business Needs Protection
16 August, 2011: With trade delinquencies on the rise again in 2011 and legal costs of debt recovery beyond the budget of most New Zealand small businesses, owner/managers can no longer afford to ignore the real and serious risk of debt defaults warns Atradius, the credit insurance and collections company.
According to a recent Dun & Bradstreet report, over 50 per cent of NZ businesses were delinquent in their trade accounts in the June quarter.
These figures are only set to rise, explains David Huey, managing director of Atradius in Australia and New Zealand. “In the post-GFC environment, many small businesses are comfortable to expand their business, developing new products or extending their customer base and offering competitive terms of credit to get ahead. With credit insurance a potentially significant cost for companies, many prefer to trust their own judgement, or take out protection sporadically, leaving themselves open to risk. Comfort is no excuse for complacency, especially with small businesses where a single debt default could be catastrophic.
“If only one or two customers fail to pay the impact on a SME can be disproportionately high as cash flow is severely reduced, and a direct impact is felt immediately. This is why the need for credit protection is essential,” he adds.
To address this problem, Atradius has developed a product locally that targets the two risk mitigation pain-points for New Zealand SMEs – cost and complexity. The Modula First credit insurance policy covers SMEs against the risk of nonpayment if a buyer becomes insolvent, and prices the policy on a simple matrix based on projected annual turnover and insured maximum liability. Management of the policy is online and dramatically streamlined compared to the traditional credit insurance product.
Aimed at SMEs with an annual turnover of $1-5m, Modula First provides up to 90 per cent indemnity for potential losses caused by insolvency and also contains a reduced paperwork component for time-poor owner/managers.
“We have coupled the policy with an online policy management tool to minimize administration time for the policy holder,” David Huey adds.
To find out more about Modula First please visit

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