When Johnstone Supply decided to pursue a plan for high growth that would expand its operations into nine locations and grow its sales from $9 million to almost $40 million, Company CFO Jeff Green, was particularly concerned about the credit risk that could arise during periods of rapid expansion.
As the company expanded outside of its original locations in Maryland, Johnstone Supply was taking on new customers the company’s management did not know personally or by reputation. “We knew that some new customers were shopping for great service or based on price, but we were also concerned that a lot of new customers were shopping for credit because they could not get it elsewhere,” said Green.
As the former CFO of a seasonal supplier to retailers, Green has seen firsthand the positive impact credit insurance can have on a company’s financial strategy. His former employer was one of the suppliers affected when one of its key buyers, Kmart Corporation, filed for Chapter 11 bankruptcy in 2002 while owing more than $1 million. Without credit insurance to cover the loss, that firm may not have survived.