The Government has buckled under pressure from businesses and backdated the top-up trade credit insurance scheme to October but the costs and bureaucracy involved will continue to hinder wide adoption.
Announced in the budget, the £5bn initiative was applicable to organisations that had seen their credit reduced from 1 April, but following a low take up from firms, eligibility has been extended by a further six months.
It has emerged that just 13 applications across the UK have been processed in that time, with ETC the only major IT distributor to take up the scheme.
Business secretary Lord Mandelson said: "This extension will give more small and medium sized businesses flexibility to respond to a reduction in their credit insurance cover.
"We are acting decisively to help more businesses and allow them the breathing space to adjust their business models in response to the current climate," he added.
Credit insurer HCC will also join Euler Hermes, Atradius and Coface as a provider of the Government's top up scheme.
Confederation of British Industry director general Richard Lambert said it had called for changes to be made, adding "restoring confidence is critical to improving the economy, and this gives companies more certainty about their ability to trade."
Many resellers and distributors saw their credit aggressively cut by insurers from October to April and the Government scheme had not yet addressed this issue, said Graydon UK managing director Martin Williams.
"This is a welcome move, backdating the insurance by six months will be a lot more useful for businesses," he said.
Under the initiative, distributors must pay a 2% administration fee to the Government and 0.3% to the credit insurer, on top of the premium already paid to the underwriter.
Each top-up contract runs for six months but at any point the credit insurer reserves the right to reduce the level of insurance provided.
"The scheme is definitely a step in the right direction," said a spokeswoman at SCH Distribution, parent of ETC.
"Whilst each case needs to be viewed on its own merits, take-up could be improved by guaranteeing no change over the top up period," she told MicroScope.
HP house Kavanagh saw its credit insurance reduced in January and managing director Rob Campbell, who was initially sceptical of the Government's efforts to step up to the mark, said he had changed his mind after partnering with ETC.
"There is clear evidence that it can be used to support the channel; it has given us the green light to continue trading at the level we had been and do not need to change our procurement practises," he said.
However other distributors reckon bureaucracy and the costs of using the scheme have deterred mass adoption.
"It's a useful tool but uptake will not be widespread because it creates an additional layer of administration for the distributor and the costs can be quite painful," said Eddie Pacey, European director of credit services at Bell Micro.
Jon Bunyard, general manager at CCD, agreed it too would be highly selective in its use of top-up insurance.
"That does not mean we are walking away from customers that lose some of their credit insurance but will judge each case on its merits and if the risks are justified we will self insure," he told MicroScope