credit insurance

leon_g_2

i run a small building company which also carries out sub contracting work for other main contractors/building companies.

with the credit crunch it has become apparent that insolvencies are becoming more commonplace in the construction sector.


is it worth considering purchasing credit insuarnce to cover this risk. can anyone give advice on the best place to buy and any pitfalls to avoid etc.

cheers in advance

john1002

It is expensive but int he current climate worth it, the only downsize is whether your exsiting customer base will get cover, but in the end it is liek any insurance, your own business needs and exposure will judge whether it is right for you.

leon_g_2

thanks for reply john1002.

do you have any idea as to what kind of cost i would be looking at.
will it be a certain percentage of turnover?.

vivatifosi

Hi Leon,

I'm not in construction and don't have the insurance mentioned, but wanted to make a couple of other points.

Firstly, do you currently ask for staged payments from your customers? If not, then that could also be something to look at.

Second, as you are dealing with registered companies then there is a software program called FAME that is sometimes available in the bigger libraries (county libraries etc) as well as in the City Business Library and British Library in London (available for a small fee by phone). It is an online database of UK registered companies.

You can get what's called a QUI score on FAME. It is a type of credit score. Essentially the closer the number is to zero, the more likely a company is to fail. The "average" company should score between 40-60. For the sake of a couple of quid, I'd ask them to do an enquiry on your clients and see what their QUI scores are. Companies with a QUI score of 20-40 are four times as likely to fail as others in their sector, whereas those below 20 are deemed as more precarious. See link here for more info:

http://www.jordansonline.co.uk/BIS_credit.htm

Obviously FAME won't be as good as a real credit score from the likes of Experian, or the insurance you're looking at, but it is a lower cost and useful back up to both, that will at least give you an idea of who to watch out for.

Qui scores can be caught out by huge shifts in an industry (as is the case in the building industry now), but if anyone goes under, in the scheme of things it is still more likely to be those that were risky to start with.

leon_g_2

cheers vivatifosi.

yes, i do currently get monthly stage payments.

i will check out FAME.

thanks for your help