Euler Hermes is marketing what it describes as a deductible guarantee as an alternative to letters of credit (L/C) and bank guarantees to UK businesses.

The trade credit insurer claims that using this cover would unlock working capital and funds for investment currently required for L/Cs provided by banks.

Deductible guarantee

Euler Hermes describes the deductible guarantee as cover whereby the issuing insurer acts as a guarantor for the delivery of goods or a service.

As well as freeing up capital, the trade credit insurer reckons additional benefits could include an enhanced security profile, an expansion of financing lines, and a diversified security portfolio for insurance companies accepting the guarantees as an alternative to L/Cs.

Economic growth

Recovery in the UK economy is encouraging businesses based there to consider domestic and international investment, according to a statement released by Euler Hermes.

It argues that alternative financial instruments, such as deductible guarantees, could help unlock funding lines for working capital and investment in growth at a time when the UK economy is growing.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.