Before the recent credit crunch, banks were practically tripping over themselves to provide working capital to the most attractive borrowers. In the late 1980s it wasn't uncommon for a small business with good credit to borrow as much as 90% against its accounts receivable. Strong companies looking for working capital today may be lucky to get 70% on their receivables -- that is, unless they have credit insurance.

Designed to protect a business in the event that its customers can't pay, credit insurance is widely used in Europe. (It's almost as common as property and casualty insurance.) But it has only recently been gaining ground in the United States as skittish business owners look for ways to preserve their capital from the ravages of uncollectible accounts. Bankers like credit insurance because it can limit their exposure. "It reinforces the quality of a company's receivables and takes away the doubt," says Bill Dehmer, a vice-president with Chemical Bank in Albany, N.Y.

If you're at all concerned about what would happen if several key customers went out of business in rapid succession, you should plan for just such a calamity. "Like life insurance," notes one underwriter, "if you wait until you've been diagnosed with a terminal illness, it will be a lot harder to get." As a rule of thumb, premiums (which are tax deductible) run anywhere from one-tenth to a half of a percent of the amount covered. Currently, there are four companies offering credit insurance throughout the country. Three market their coverage of domestic and foreign receivables to small and midsize companies:

American Credit Indemnity (ACI), 800-879-1224. Owned by Dun & Bradstreet and based in Baltimore, ACI (the biggest carrier) says it targets companies with revenues ranging from $5 million to $150 million. Its traditional client base has been manufacturers that sell to retail accounts, although lately, notes senior vice-president Mike Stevens, ACI has been trying to diversify toward manufacturers and service companies selling to other manufacturers.

Continental Insurance, 800-283-7965. Continental, headquartered in New York City, aims its coverage at much the same market ACI does, starting with businesses with sales of $1 million. Lately, Continental has been concentrating on companies in industries such as food distribution, electrical supply, and sporting goods.

Fidelity and Deposit (F&D), 800-423-6624. F&D, in Baltimore, says it will consider coverage for manufacturers, wholesalers, and distributors with revenues of at least $1 million. Among the industries it likes: food, lumber, and paper. "We look at any company that does business on open unsecured credit terms," says senior sales associate Jim Dezell.

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