A more direct way to protect receivables against customer default.
Get in TouchMost companies are familiar with credit insurance—but fewer understand credit puts.
While both are designed to protect against non-payment, they are structured differently and used in different situations.
Credit puts offer a more direct, transaction-based approach to transferring risk.
A credit put is a financial agreement that allows a company to transfer the risk of non-payment on a specific receivable or buyer.
If a covered customer fails to pay—typically due to insolvency—the provider of the credit put purchases the receivable at a predetermined price.
Key distinction: Credit puts are often used for debtors that may be considered higher risk—where traditional insurance might have limited availability or higher premiums. This makes them a useful tool when dealing with customers who fall outside standard credit insurance parameters.
Coverage scope: Credit puts predominantly cover insolvency risk (bankruptcy, liquidation, receivership). Unlike traditional credit insurance, they typically do not cover protracted default risk (extended non-payment without formal insolvency proceedings).
In practical terms: It converts an uncertain receivable into a more predictable outcome.
A company identifies a customer or exposure they want to protect
A credit put provider agrees to cover that specific risk
If a qualifying non-payment event occurs
The receivable is purchased or paid out based on agreed terms
Rather than filing a claim, the transaction is structured more like a transfer of the receivable.
Credit insurance is often used to manage a portfolio. Credit puts are typically used to solve for a specific risk.
Credit puts are often used in situations where traditional structures may not fully align with the need.
Because credit puts can provide a more defined and predictable outcome, they are often used in conjunction with:
Receivables Financing
Structured Credit Transactions
Capital Provider Requirements
In some cases, the structure is designed as much for financing as it is for protection.
For companies looking to protect a broad portfolio of customers or implement ongoing risk management, traditional credit insurance may be more appropriate.
Credit puts are typically more targeted and used for specific exposures rather than entire books of business.
There isn't a one-size-fits-all solution.
The right approach depends on:
The size of the exposure
The number of customers
Financing considerations
Risk tolerance
In many cases, companies use a combination of structures.
A quick review can help determine whether a credit put, insurance, or another structure makes sense for your situation.
Get a Free Risk ReviewUnderstanding your options is the first step to managing risk.