Bad-debt protection · explained simply

Protect approved invoices when a customer cannot pay.

Optional bad-debt protection can sit alongside invoice finance, helping protect your business if an approved customer becomes insolvent or suffers another covered failure to pay.

What it isWhat it coversWho it suitsHow it worksFAQs
The simple version

What is bad-debt protection?

It is optional cover attached to an invoice-finance facility. If a customer approved under the policy becomes insolvent or fails to pay for a covered reason, the protected proportion of the eligible invoice can be paid under the agreed terms.

In short: invoice finance helps with when you get paid; bad-debt protection helps with the risk that an approved customer may not pay at all.
In plain English
Bad-debt protection

Cover for eligible invoices owed by approved customers, subject to credit limits, policy terms, exclusions and claim conditions. It is commonly added to factoring or invoice discounting rather than bought as a standalone loan.

OptionalAdd it where the customer concentration or risk justifies the cost.
Customer-specificCover normally depends on an approved credit limit for each debtor.
Terms applyEligibility, waiting periods, exclusions and evidence are set out before cover begins.
What it covers

Protection built around approved customer risk.

The exact scope varies by facility, but the structure is designed to reduce the impact of a serious customer failure on your cash flow.

Approved debtor insolvency

Cover can respond when a customer with an agreed credit limit enters a covered formal insolvency process.

Protracted default

Some facilities may cover persistent non-payment after the contractual waiting period, even without formal insolvency.

Eligible invoices

Only valid, undisputed invoices within the approved terms and debtor limit are normally protected.

Important: cover is not automatic for every invoice or customer. Credit limits, exclusions, notification deadlines and claim evidence matter. We explain those terms before you decide.
Who it suits

Useful where one unpaid account could materially hurt.

Protection is most valuable when customer concentration, contract size or sector volatility makes a single failure difficult to absorb.

Customer concentration

A small number of customers make up a large share of your debtor book or monthly turnover.

Rapid growth

You are taking larger orders or extending more credit than the balance sheet could comfortably absorb.

Long payment terms

Your exposure remains open for 60, 90 or more days, increasing the time in which customer circumstances can change.

Volatile sectors

Your customers operate in markets where insolvencies, project delays or sharp trading changes are more common.

Export customers

Overseas debtor risk can be harder to assess and collect, depending on territory and policy availability.

Contract-led work

Individual invoices are large enough that one non-payment would disrupt payroll, suppliers or future delivery.

How it works

Clear limits before you extend the credit.

How bad-debt protection works

Credit assessment, protected invoices and a defined claims process.
1Assess the customerA credit limit is requested and approved for the debtor.
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2Raise eligible invoicesValid invoices within the limit and policy terms are protected.
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3Monitor and collectPayment performance and adverse events are tracked under the facility.
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4Claim if coveredIf a covered failure occurs, the claim follows the agreed process.
The protection works alongside the invoice-finance agreement. It does not remove your responsibility to supply valid goods or services, resolve disputes and follow credit-control and notification requirements.
Quick answers

Bad-debt protection FAQs.

No. Cover normally requires an approved credit limit for the individual customer, and invoices must remain within that limit and the policy terms.
Usually not while a genuine dispute remains unresolved. The invoice must normally be valid, enforceable and undisputed before a protected loss can be considered.
It serves a similar risk-management purpose, but here the cover is integrated with the invoice-finance facility, debtor limits and funding administration.
The protected percentage depends on the facility and policy. We set out the covered proportion, excesses and exclusions clearly in the proposal.
Ordinary lateness alone is not necessarily a claim. Some policies include protracted default after a defined waiting period, while others focus on formal insolvency.
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