Trade Credit Insurance and Credit Control for Freight Forwarders

A freight forwarder usually pays other people before its customer pays it. Carriers, terminal charges, haulage and sometimes import duties and taxes all fall due on the forwarder's account, while the invoice to the customer runs on 30-day or longer terms. If the customer goes bust or simply stops paying, the forwarder still owes all of those third parties. Credit control is therefore not an accounting nicety in forwarding; it is a core part of how you decide which customers to serve and on what terms.

This guide covers the practical sequence: understand why your exposure is unusual, check a customer before the first shipment, set a limit and terms, decide when to release cargo only against payment, escalate collections early, and consider whether trade credit insurance belongs in your setup. It complements our guide to credit control and getting paid; this one goes deeper on customer checks and on insurance.

Why a forwarder carries unusual credit risk

A seller of goods risks the price of the goods. A forwarder's exposure is different in shape, and it is often larger than the margin it earns.

• Disbursements paid up front. Ocean and air freight, terminal handling, trucking and warehousing are typically paid to the supplier on the forwarder's own terms, whether or not the customer has paid.
• Duties and taxes. Where a forwarder or its customs broker pays import duty and VAT or equivalent on the customer's behalf to release cargo, the amount at risk can be large compared with the freight margin on the same job.
• Thin margins. One unpaid invoice can wipe out the margin on many good shipments. Our guide to pricing, margin and overhead shows why: the profit on a single move is small relative to the cost you have already paid out.
• Cargo is not always yours to hold. You may be carrying goods owned by a third party, and your practical leverage depends on where the cargo is and what documents you control.

The takeaway is simple: measure exposure as everything you have paid out or will pay out for a customer that has not yet paid you, not just as the value of your own invoice.

Step 1: check the customer before the first shipment

The cheapest moment to avoid a bad debt is before you have shipped anything. A reasonable pre-shipment check covers these points.

1. Confirm the company exists and who is behind it. Look the company up in the official company registry of its country. Confirm the legal name, registration number, registered address, status (active, dormant, in liquidation) and directors. Make sure the name on your credit application matches the registry exactly.
2. Read the filed accounts where they exist. Many jurisdictions require companies to file accounts. Look at trading history, net worth, whether liabilities far exceed assets, and how old the business is. Some countries do not publish accounts for private companies, in which case you need another source.
3. Take trade references. Ask for two or three suppliers the customer currently buys from on credit and call or email them. Ask how long the customer has traded with them, what limit they hold and whether payments arrive on time.
4. Consider a credit agency report. Commercial credit agencies sell reports and scores on businesses. Treat a score as one input, not a verdict, and note that coverage varies a lot by country and by company size.
5. Check the human basics. Does the buyer have a real address and phone number, a working website and business email domain, and consistent details across documents? Sudden requests for urgent shipment, unusual routing or payment to a different bank account deserve extra scrutiny.
6. Screen the parties. Forwarders also have to screen against restricted-party lists; see our guide to restricted party screening.

Keep the file. If a dispute or an insurance claim arises later, a dated record of what you checked and when is useful evidence that you acted reasonably.

Step 2: set a credit limit and terms

A credit limit is the maximum unpaid exposure you will accept from one customer at any moment. Set it deliberately rather than letting it grow shipment by shipment.

• Base the limit on the customer's strength, not on their enthusiasm. A newly formed company with no accounts and no references should start with a low limit or none at all.
• Count everything. Include unbilled work in progress, disbursements you have paid and duties you are advancing, not only issued invoices.
• Match terms to risk. Standard terms for a well-established customer can be looser; a newer or weaker customer might get shorter terms, smaller limits or prepayment.
• Write it down. Terms should appear in your credit application and in your trading conditions. Our guide to what a forwarder's trading conditions say explains what customers are agreeing to.
• Review on a schedule. Revisit limits at least annually and immediately when payment behaviour changes.
• Enforce the limit. A limit that operations staff can override without a second person's approval is not a control. Decide who can approve exceptions and log them.

Step 3: know when to hold cargo or ask for cash first

For higher-risk customers, the safest control is to change the payment terms rather than to extend credit and hope. Common options include:

How much control you really have depends on the type of shipment and who holds the documents. Our guide to freight payment terms, prepaid vs collect explains how the terms on the bill of lading change who controls the cargo.

Lien and possessory rights: a general concept only

Many forwarders' standard trading conditions include a lien clause. In general terms, a lien lets a forwarder retain possession of goods, and sometimes sell them, to recover money the customer owes. Whether a lien is enforceable, over which goods (only the specific shipment, or other goods of the same customer as well), and what steps must be followed differs by country and by the wording of the contract. Rights can also be limited where the goods belong to a third party, or where a carrier or terminal already has its own claim on them. This article is not legal advice. Before you rely on a lien, read your own trading conditions and take advice in the jurisdiction where the goods are located.

Step 4: how trade credit insurance works

Trade credit insurance is a policy that pays an insured business a share of its loss if a covered customer does not pay. The insurer's own guides describe the basic mechanics consistently: the insurer assesses the creditworthiness of the buyers you want covered and assigns each a credit limit, which is the most it will indemnify if that buyer fails to pay. Allianz Trade's guide states that each customer has a credit limit, and that the insurer may raise or reduce it when conditions change. If collection fails, the insurer compensates you according to the insured percentage.

The terms that matter

• Buyer credit limits. Cover for a specific customer is capped at the limit the insurer approves for that buyer. A buyer the insurer will not cover is simply not insured, whatever you decide to sell them.
• Whole turnover, key accounts or single buyer. Insurers describe policies that cover all of your customers (whole turnover), only your largest customers (key accounts), or one main customer (single buyer). Whole-turnover cover spreads the insurer's risk and is often priced accordingly; narrower cover is more targeted. Which fits depends on how concentrated your revenue is.
• Cancellable versus non-cancellable limits. Some policies allow the insurer to reduce or withdraw a buyer's limit when its financial position worsens, while others give some limits stronger protection for a period. Ask exactly how and when a limit can be changed, and what happens to shipments already made under it.
• Notification and overdue reporting. Policies require you to tell the insurer when invoices become overdue beyond a set period. Insurer guidance notes that prompt notification of late payments is essential to keep a claim eligible, and that cover for new sales to that buyer is normally suspended until the account is brought up to date.
• Waiting period and maximum extension period. Policies define how long an invoice can stay unpaid before a claim can be made (a waiting period), and how much extra time you may agree with a buyer (a maximum extension). Exact lengths vary by insurer and policy, so read them in your own schedule rather than assuming a standard number.
• Insured percentage. Insurance pays a share of the loss, not all of it. The exact percentage is set in the policy, and the uninsured part stays with you.
• Exclusions. Trade credit insurance generally covers business-to-business receivables against commercial and political risks. It is not a substitute for resolving disputes: if a customer refuses to pay because it disputes the service, the policy may not respond until the dispute is resolved. Check how your policy treats disputed invoices.

Two practical implications follow. First, insurance does not replace credit control; you are still expected to check customers, stay within limits and report overdue accounts on time, and a claim can be reduced or refused if you do not follow the policy conditions. Second, an insurer that will not approve a limit on a buyer is giving you useful information before you ship.

Questions to ask an insurer or broker

1. Which of my customers can be covered, and at what limits?
2. Can limits be cancelled or reduced, and with what notice?
3. What is the insured percentage, and does it differ for insolvency and for protracted default?
4. How long is the waiting period, and what is the maximum extension I can agree with a buyer?
5. When must I report an overdue account, and what happens if I am late?
6. Are duties, taxes and disbursements I pay for a customer treated as insurable debt, or only my own freight charges?
7. How are disputed invoices treated?

The sixth question matters especially for forwarders, because whether pass-through costs count as the insured debt is a policy-wording point you should not assume. Ask the insurer in writing.

Insurance versus factoring

The two are often confused, but they do different jobs. Trade credit insurance covers the risk that a customer does not pay; you still wait for the customer's payment unless the insurer pays a claim. Factoring finances an invoice: a finance company advances cash against it. The two can be combined, and some factoring arrangements are non-recourse, meaning the factor takes the loss in defined cases, but that protection is narrower than many people assume. Our guide to freight factoring for forwarders covers what factors actually offer and how they price it.

Step 5: escalate collections early

Whether or not you are insured, the same discipline applies to overdue invoices.

1. Send a reminder before the due date and confirm the invoice was received and is not disputed.
2. Chase on day one after the due date. A short call to a named person is more effective than a generic email.
3. Stop new business on overdue accounts. Do not release further shipments or book new jobs until the past-due balance is cleared or an agreed plan is in place. If you have insurance, this is often also a policy requirement.
4. Agree any payment plan in writing. Note that agreeing extra time with a buyer can affect insurance cover, so check your policy before you do.
5. Escalate to formal demand and, if needed, a collections agent or legal action according to your own thresholds. Set those thresholds in advance so a slow-paying account is not left to drift.
6. Keep the paperwork. Signed credit application, trading conditions, delivery documents and correspondence all support a claim, whether against the customer or the insurer.

If the reason for non-payment is a billing dispute, resolve it quickly and separately; our guide to the freight invoice dispute process explains how disputes look from the shipper's side.

What to do next

• List your top ten customers by exposure, counting disbursements and duties paid, not just invoices.
• Check that each has a documented limit, terms and a credit file with the checks above.
• Decide which customers should move to prepayment or release against payment.
• Ask a broker or an insurer named above for a quotation, using the questions in this guide, and compare it with the cost of your worst realistic bad debt. We have no traceable, sourced industry benchmark for typical bad-debt or payment-days figures, so measure your own.
• Re-read your trading conditions for payment, lien and limitation wording, and have them reviewed locally.

Sources used for the insurance mechanics: the trade credit insurance guides published by Allianz Trade, as of September 2026. Other insurers, including Coface and Atradius, publish their own product descriptions and their terms differ, so always rely on the policy schedule you are actually offered.

Finding customers and partners

Good credit control is easier when you are choosing among customers rather than accepting any that come along. You can browse logistics companies by country, city and service in the CargoLinked directory, or look at shippers' current freight requests on the requests board. Listings are self-published, so do the same checks on any counterparty you find.

This article is general information, not legal, insurance or financial advice. Policy terms, lien rights and collection rules differ by country and contract; confirm details with a qualified adviser.