Businesses facing cuts in the level of available credit insurance cover or struggling to gain cover can make use of a new £5 billion government scheme. The scheme has been set up in response to concerns that reductions in the availability of trade credit insurance cover is affecting businesses’ working capital facilities and increasing the pressure on suppliers to shorten payment terms and demand up-front payment.

Under the scheme, which will run from 1 May 2009 until 31 December 2009, businesses will be able to purchase six-months' top-up trade credit insurance cover (on the same terms as the underlying cover) if credit limits on their UK customers are reduced.

The scheme is open to all eligible businesses trading in the UK which hold a whole turnover trade credit insurance policy and have suffered a reduction in cover from 1 April 2009. Top-up cover can be purchased via the existing insurance provider who will administer the scheme on the Government's behalf.

Whilst the scheme has been welcomed it has faced criticism for being long overdue (France adopted a state guarantee scheme protecting companies unable to get cover elsewhere last year). It has also been criticised for not being available to companies that had their credit reduced before 1 April 2009 or whose credit insurance has been withdrawn altogether.

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