With businesses crying out for trade credit insurance, embattled minister Mary Coughlan's Department of Enterprise, Trade and Employment has finally responded by setting out plans for a framework agreement for credit insurance consultancy services, targeting initially the export sector.

These policies provide cover for businesses against bad debts and play a key role in supporting business, particularly the small and medium-sized businesses that are part of our economic backbone, by restricting their exposure to non-payments.

Critics, however, warn that the department's decision to opt for tenders and consultations mean it could be too late for some companies, as it may take three to four months for a decision to be made on whether such a scheme will even be introduced.

As the department itself stressed in a statement to the Sunday Tribune: "while this is a significant and necessary step in the process, it is not, of itself, a decision to introduce a scheme. On completion of due diligence, the matter will be considered again by the government. Issues such as default risk, exchequer exposure to costs, value for money and the impact of any such scheme on business will be part of the exercise in hand, and will inform any future government decision on whether to introduce a state-backed top-up export credit insurance scheme."

ISME chief executive Mark Fielding said a scheme should have been introduced some time ago.

"We've been calling for this for a long time. In August the exporters got a shock when the trade credit insurance was pulled. The department has a history of being able to [introduce a scheme], like they did for the beef industry, but because it was the SME sector I don't think it was looked on as important," he said.

Fielding said many exporters had found European businesses wouldn't deal with them unless they had the insurance and the cost of it surged as the economy worsened.

"The cost was exorbitant. I think it was another example of the department's lack of understanding of the SME sector and being able to deal with them," he said, adding that the surging premia were a serious problem at a time when exporters were already struggling with the weakness in sterling and the dollar.

How large were those premium increases? According to Celine Caulfield, commercial director with Trade Credit Brokers, Ireland's largest independent credit insurance specialist broker, they rose by between 30% and 300% depending on the customer's profile and number of claims.

Construction, transport and retail were particularly badly affected but hotels are also beginning to see premium increases, as is the food sector, a reflection of the increase in insolvencies, voluntary liquidations and examinerships in the past 18 months.

Earlier this year Trade Credit Brokers wrote to Taoiseach Brian Cowen asking him to provide top-up insurance to replace withdrawn insurance credit lines. Similar schemes have already been introduced in Britain and France.

The department has been looking at the issue for some time, stating last week that, "in light of reported further pressures on business and exporters, along with the fact that two other member states (Luxembourg and Denmark) have recently taken steps to introduce short-term state-backed export credit insurance schemes, the tánaiste requested that the subject of export credit insurance be further examined by her officials and Forfás".

Following discussions with her government colleagues, the tánaiste has now instructed the department "to proceed to an accelerated tendering process for the purposes of carrying out forensic due diligence on the credit insurance market in Ireland. The due diligence will include an in-depth examination of the client databases of the main credit insurance providers operating in Ireland and will assess the extent of market failure and the level and nature of any such market failure will be quantified. The due diligence will also assess the costs and impacts of possible intervention of the state in this area."

The department has also signalled it may require medium- to long-term credit insurance consultancy services.

Caulfield, however, cautions that the scheme is "needed immediately rather than down the line". She says the lines of insurance are opening slightly, partly because a lot of debtors are willing to open their books and provide up-to-date management accounts to the insurance providers. The number of claims being registered is down slightly in recent weeks, although Caulfield says this could just be due to a natural decline in trade as the economy shrinks.

"The market has slightly stabilised in that there isn't a huge influx of new bad debts. However, there are still difficulties in placing business," she said.

She also said that while insurers are willing to work with customers on payment plans, some companies were not being given a chance to trade out of their debts because of a lack of support from the banks. That lack of access to banking capital is something the SME sector is continuing to suffer from on a daily basis and will inhibit the economy's recovery when the upturn finally comes.