Canadian manufacturers are operating in one of the most uncertain trade environments in decades. Political volatility, shifting tariffs and slowing global growth are increasing pressure across supply chains, particularly with customers’ ability to pay on time. At the same time, many manufacturing businesses are carrying significant accounts receivable balances, often concentrated among a small number of buyers and supported by long payment terms.
With more than 20 years of insurance and risk management experience serving the manufacturing industry across Canada, Acera Insurance’s Rob Shearar explores the factors driving exposure across global trade and how manufacturers can leverage trade credit insurance to protect against growing instability.
Manufacturers face global market conditions shaped by political and economic forces that are creating challenges through supply chains that could linger for years. Decisions made by governments, regulators and trading partners are shifting where weaknesses appear and how quickly they spread.
For many manufacturers, the financial impact can first show up downstream. Customers may appear operationally sound but face cash flow disruptions beyond their control, leading to delayed payments or outright default. These issues often arise with little warning and are not necessarily reflective of the strength of the underlying business relationship.
As payment disruptions persist, receivables can become the primary channel through which broader instability is felt, especially for businesses operating with limited diversification across customers or markets.
“Manufacturers can no longer afford to be reactive; building resilience and the capacity to absorb uncertainty is essential moving forward.“
– Rob Shearar
Geopolitical instability is increasing payment uncertainty in manufacturing
Political volatility has become a defining feature of the global trade landscape in 2026. Canada’s manufacturing sector remains deeply connected to cross‑border and international supply chains, particularly with the United States. These relationships are being tested as manufacturers navigate:
Unpredictable U.S. political decision-making
Tariff changes and trade renegotiations
A broader shift toward protectionist and bilateral trade tactics
Slowing investment and weaker buyer confidence
Together, this mix of pressures makes it harder for customers to plan, finance growth and manage liquidity – even when demand remains stable.
For manufacturers, consequences from these policy shocks often appear long before a formal insolvency as delayed payments, extended terms or liquidity problems at the buyer level.
Why a traditional credit assessment is ineffective in today’s manufacturing landscape
Many manufacturing businesses rely on historical payment behaviour, financial statements or long‑standing relationships to assess creditworthiness. While effective in stable environments, this approach tends to lag behind reality during volatile conditions.
Customers can appear financially strong while facing:
Their own customers failing or delaying payment
Financing being withdrawn or tightened
Mergers, restructurings or strategic market withdrawals
Sudden sector downturns affecting demand
Supply chain disruptions increasing costs or delaying production
These second‑ and third‑order effects are increasingly driven by global politics and macroeconomic forces, making traditional credit assessments less predictive than they once were. Manufacturers often have little visibility into these pressures until payment issues emerge.
Accounts receivable are often a manufacturer’s largest uninsured exposure
Accounts receivable often represents one of the largest assets on the balance sheet. Payment terms of 30, 60 or even 120 days are common, and receivables are often concentrated among a small number of key customers.
This creates several challenges at once:
- A single bad debt can erase months of operating profit.
- Growth typically increases exposure faster than internal credit controls can adapt.
- Traditional financial statements provide delayed insight into real‑time buyer risk.
Long production cycles, high fixed costs and thin margins mean that bad debts have a disproportionate impact on financial performance.
– Rob Shearar
A manufacturer operating at a 5% net margin with a single $500,000 bad debt requires roughly $10 million in new revenue just to return to the same profit position.
How trade credit insurance helps manufacturers stabilize their cash flow
Against this backdrop of shifting political dynamics and increasingly fragile buyer behaviour, many manufacturers are reassessing how they can limit swings in cash flow.
Trade credit insurance, also known as accounts receivable insurance, is designed to protect businesses against customer non‑payment due to insolvency, bankruptcy or protracted default. Rather than encouraging sales growth, it functions primarily as balance sheet protection.
Turning receivables into a managed asset
Once production begins, receivables exposure can’t easily be reduced. Trade credit insurance helps convert that exposure from an unsecured risk into a more controlled asset by transferring a portion of the risk off the balance sheet. This reduces the financial shock associated with unexpected customer defaults and helps stabilize cash flow in volatile operating conditions.
Protecting margin and earnings stability
In capital‑intensive manufacturing operations, bad debts don’t affect profitability evenly. A single unpaid invoice can eliminate months of operating margin and require significant replacement sales just to break even. Trade credit insurance helps preserve earned margins by preventing receivables from becoming sudden earnings disruptions. In uncertain trade environments, this can materially reduce EBITDA volatility.
Supporting safer expansion and new customer relationships
Manufacturers most often encounter trade credit insurance when expanding with new customers, new sectors or new jurisdictions. Trade credit insurers assess and continuously monitor customers, approving or declining coverage based on credit risk. For manufacturers, this provides valuable insight:
- Approved customers signal lower risk.
- Reduced limits or exclusions act as early warning indicators.
- Decisions are informed by global, sector and macroeconomic trends
This allows manufacturers to pursue growth opportunities without relying solely on internal credit history or assumptions based on past behaviour.
Strengthening lender confidence and financing flexibility
From a lender’s perspective, insured receivables are generally viewed as more reliable collateral. Banks often treat trade credit insurance as risk transfer rather than an operating expense. As a result, insured receivables can support improved advance rates, reduce bad debt reserve requirements, and strengthen covenant positions – enhancing access to working capital during uncertain periods.
Complementing, not replacing, credit discipline
Trade credit insurance works best alongside strong internal credit practices, including clear credit policies, active receivables management and defined escalation triggers. It doesn’t replace credit discipline. Instead, it reinforces existing controls, providing an additional layer of protection when internal controls reach their limits.
Supporting financial resilience for manufacturers with trade credit insurance
Manufacturers don’t purchase trade credit insurance because they expect customers to fail. They purchase it because they can’t control when one does or why. Today’s geopolitical climate is increasing the likelihood payment issues will arise unexpectedly for reasons outside a manufacturer’s control, even among long‑standing, historically dependable buyers. With accounts receivable often representing a major balance sheet exposure, managing that risk has become a strategic priority.
Trade credit insurance can be leveraged to protect cash flow, preserve margins and maintain financial resilience in an unpredictable trade environment where many of the risks sit beyond a manufacturer’s line of sight.
Connect with an Acera Insurance advisor to discuss how trade credit insurance can help protect your receivables amid ongoing trade uncertainty.
FAQs
Acera Insurance’s Rob Shearar answers four questions about trade credit insurance for manufacturing.
Trade credit insurance protects manufacturers against losses from customer non‑payment due to insolvency, bankruptcy or prolonged default. Coverage typically applies to a portfolio of receivables rather than individual invoices, helping businesses manage credit risk at a balance sheet level. It’s designed to respond when customers fail for financial reasons beyond the manufacturer’s control.
No. While commonly associated with export risk, trade credit insurance can also be valuable for domestic manufacturers. It’s especially relevant where businesses rely on a small number of large customers, operate on extended payment terms, or work within sectors exposed to economic or political volatility that can affect customer liquidity.
Trade credit insurance doesn’t replace credit policies or receivables management processes. It works best alongside strong internal credit discipline, including clear approval processes, monitoring and escalation procedures. The insurance adds a layer of financial stability that internal controls alone can’t provide, particularly when external risks escalate quickly and expose businesses to unpredictable payment disruption.
Lenders often view insured receivables as more reliable collateral. Trade credit insurance is typically recognized as risk transfer rather than an operating expense, which can support improved advance rates, reduced bad debt reserves and lower overall borrowing costs. For manufacturers relying on working capital facilities to fund production cycles, this can meaningfully improve financial flexibility, especially during periods of political or economic uncertainty.
Related reading
- Geopolitical and business risk trends for 2026: A Canadian perspective
- Global crisis to local disruption: Supply chain challenges for Canadian manufacturers
Rob Shearar is Director, Independent Business Unit at Acera Insurance. He brings more than 20 years of insurance and risk management experience and specialized expertise in manufacturing, wholesale and distribution, construction and commercial real estate. Rob is the practice leader for our manufacturing specialty nationwide and an advisory board member for Canadian Manufacturers & Exporters. Connect with Rob at 604.484.0208 or robert.shearar@acera.ca.
Information and services provided by Acera Insurance, Acera Benefits and any other tradename and/or subsidiary or affiliate of Acera Insurance Services Ltd. (“Acera”), should not be considered legal, tax, or financial advice. While we strive to provide accurate and up-to-date information, we recommend consulting a qualified financial planner, lawyer, accountant, tax advisor or other professional for advice specific to your situation. Tax, employment, pension, disability and investment laws and regulations vary by jurisdiction and are subject to change. Acera is not responsible for any decisions made based on the information provided.
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