Credit Protect From Global Commercial Credit

Accounts receivable insurance and credit risk insurance

CREDIT PROTECT - Q & A

Questions and Answers
1.       What is Credit Protect – Credit Protect is a Put Option designed to cover open accounts receivable on a buyer (or buyers) to protect against customer default due to Insolvency.
2.       Who purchases the accounts receivable under Credit Protect – We represent several investment grade banking institutions who provide this protection.
3.       What are typical uses of Credit Protect – Credit Protect provides direct credit protection for the underlying accounts receivable exposure to help a supplier eliminate concern about credit quality or concentration issues with the buyer.
4.       What is the typical profile of a company Credit Protect is written on – the fee is established based on a financial review of the company being considered for a Put Contract. Typically, it involves a public company, or a private company with public debt. However, Credit Protect may be offered on a private company if we can secure a copy of the company’s latest financial statement (GCC would assist you in securing the necessary information).
5.       How does Credit Protect Work – you purchase a Put Option on your customer (or customers) that you select. The key terms of a Put Option are:
   a.       Obligor – This is your Buyer (Customer)
   b.       Contract Term – you will want to purchase a Put contract for the length of time you require the protection. You will want to take into consideration the fact that the Insolvency must occur during the term of the Put contract for the loss to be covered.
   c.        Trigger Event – a bankruptcy filing or similar Insolvency event by the designated obligor.
   d.       Notional Amount – this is the amount of protection you are purchasing. You have the right to “put” this dollar amount of accounts receivable to the Option Seller.
   e.       Strike Price – the amount, on a percentage basis, that will be paid back to you on the qualified accounts receivable you “put” to the Option Seller up to the notional amount of protection you purchased. This is typically set at 100% in most contracts.
6.       What is the Typical Contract Length of Credit Protect – the shortest time frame we can consider is 6-months (up to 60 months). Again, the Insolvency event must occur during the contract period, so you will want to take this into account when determining the length of contract to implement.
7.       Are there any minimum or maximum notional amounts on the Credit Protect program – we cannot typically write a Put contract for less than $300,000 notional amount. There is no written maximum (but is subject to credit review and acceptance).
8.       What is the typical Cost of Credit Protect – the fee is based on a financial review of the company being considered for a Put contract and is quoted in basis points (bps). It is market driven and determined by how many months the Put contract would be written for and the credit quality of the Obligor being considered. Typical fees range from .002 to .008 per month. The fee can approach .015 per month for very risk companies. For an estimate of cost for Credit Protect in your specific scenario, you may want to try our Credit Protect Cost Calculator here. For a quote, please click here to submit a request for a quote and find out what Credit Protect would cost.
9.       What would Qualify as a Receivable under the Credit Protect program – payment claims for goods / services delivered / provided to the obligor which are:
   a.       Not specifically subordinated or restricted as to transfer.
   b.       Not subject to any known commercial dispute or setoff to payment.
   c.        Invoiced within the term of the Put contract (or within 30 days prior, subject to past due limitations).
10.    What happens when a Loss occurs – should the customer become Insolvent during the contract period, you have the right to “put” qualified accounts receivable from the customer to the Option Seller and they will be bought for the face amount per the terms of your contract.
11.    If we implement Credit Protect, ill this affect the way we do business with the Customer – No, day-to-day business is not affected.
12.    What is the typical time for receipt of a settlement after exercising the Put Option – the same day the Option Seller receives your qualified receivables and documents. View timeline example here
13.    Can we assign Credit Protect to our Lender – Yes, subject to review and approval by the Option Seller.
14.    Is there a Deductible to Satisfy – No.
15.    Can Credit Protect be canceled mid-term – No.
16.    Can a Limit be Reduced mid-term – No.
17.    Can we pick and choose who to Credit Protect – Yes.
18.    We want to review a sample contract – an educated consumer is GCC’s best customer. We will happily provide you with a sample contract once pricing has been received and you are interested in moving forward.

For a quote, or with any questions, contact us at 877-422-7475 or use this online form to request a quote.

GLOBAL COMMERCIAL CREDIT

30200 Telegraph Road
Suite 250
Bingham Farms, MI 48025
(248) 646-9400
Toll Free: 877-GCC-RISK (422-7475)
Fax:(248) 646-0525

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