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Indies demand action as credit crisis looms 

25 Ten Boutique boss leads calls for Government to help small businesses.

Independents are facing a credit crisis because of changes to payment terms due to the withdrawal of credit insurance.

Historically, indies have been given 90 days or more to pay for stock. However, due to the tough financial climate, a number of insurance companies are pulling credit insurance, meaning brands are now cutting the length of time indies have to pay for products by half or more. Others are asking for stock to be paid pro forma, having a detrimental effect on indies’ cash flow.

Drapers spoke to 24 indies this week and found that 15 have had brands change payment terms, while 12 predicted tighter payment terms would have a negative impact.

Paul Turner-Mitchell, co-owner of young fashion indie 25 Ten Boutique in Rochdale, intends to rally indies across the UK and take the issue to the Government, and this week arranged to speak to his local MP, Simon Danczuk.

He said that being forced to find [for example] £50,000 to £60,000 upfront put the viability of small businesses into question. Turner-Mitchell said: “You don’t have thousands of pounds sitting around, especially in the current climate.”

Turner-Mitchell added that, while the previous Labour government introduced a £5bn fund in the 2009 budget to help small and medium-sized businesses that had their insurance cover reduced, trading conditions and credit insurance terms have now diminished further.

“The Government must act quickly and work with us to help address the imbalance,” he said.

Turner-Mitchell added that issues of parking and charity shops brought up in Mary Portas’s government-backed review of the high street would be secondary if the credit insurance problem was not addressed. “If indies can’t get the credit then they’ll be struggling to survive, let alone thrive,” he said.

Roger Wade, founder of pop-up shopping mall Boxpark in London’s Shoreditch, said a “massive crisis with credit” looked likely.

Wade said: “Unless that is resolved, you are going to lose 50% of independents overnight. It needs to be addressed at government level. The Government needs to fundamentally underwrite the credit firms.”

He added that having to pay upfront for stock was “effectively bankrupting” indies.

Simon Poole, managing director of men’s young fashion brand Luke, said the situation would not get any easier for indies because the fashion industry was an unstable business for banks and insurers in the current climate. Poole added that up-and-coming or unknown brands could find it particularly tricky to gain credit insurance.

Michael Weedon, deputy chief executive and communications director of the British Independent Retailers Association (Bira), pointed out that credit insurance was an ongoing problem in the fashion industry due to the large size of the orders placed.

Additionally, he added that many banks have cut indies’ overdrafts.

In Bira’s quarterly sales monitor, 61% of respondents said their overdrafts had been cut.

Weedon added: “It’s something [the Government] should be aware of because it has a growth agenda, and both of these things would be against the growth agenda.”

Tell us your views on credit insurance by emailing victoria.gallagher@emap.com

Readers' comments (9)

  • Well done Paul. Good luck with it.

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  • Traditionally, independents DO NOT get 90 days to pay for stock. This is a very misleading comment and this really should be corrected. I've been in business for over 40 years and payment terms are usually 30 days, though some brands work on 60 days and they are few and far between. The 90 day figure I would suggest is the amount of time before the legal aspect of obtaining payment comes into play. I'm sure some Indies 'use and abuse' the 90 day rule, not because they don't have the means to pay, because they know they can get away with it!

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  • Some years back, during the 'boom' time, 90 days was the norm for me but I have since witnessed that go down to 60 days and then 30 days. Hwever many new brands that I now take on want cash up front.

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  • I've been in business for over 40 years and I can tell you 90 days is certainly not the norm. Further more you should have sold that stock within those 90 days so should not still owe for it.. Get real. Why should suppliers fund your business?

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  • Why should suppliers be expected to finance independent retailers to the point of providing terms of 90 days!!!!!! If the majority of the product has not sold in 90 days you shouldnt be buying it. Most brand holders pay upfront for our stock and have to extend credit and receive their money in small amounts. We have to provide personal guarantees to the banks or invest our own money to finance our businesses. Indies should wake up and smell the coffee. In the lower end of the market it is norm that independents pay upfront or clear their bills within 30 days max!!! Why are mid and top end retailers expecting miracles or favours. Scale down your lifestyles and pay your bills!!!!!

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  • Most brands are now asking indies for cash upfront. Do indies have so much cash lying around they can just pay upfront? No. Get real. Do brands want to see indies and trade with indies? Yes. There has to be a solution. Indies are crucial for the industry and brands usually start off stocking indies. A solution needs to be found for all concerned to strength the industry as a whole. Its not brands -v- indies. It seems to me about making it work for all and securing a long term future for all.

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  • If indies cant pay their bills sell an asset or pledge it to the bank or look at your business model and raise finance. We need indies but not the Zombie Variety!!!!!!

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  • If brands are being totally honest, they only really want to deal with Indies for credibility. The money is in the multiples and they know it.

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  • Problem lies that multiples other than a JD Sports and a few others all have no insurance cover so the best combination is strong multiples and strong indies. However there needs to be a mindset change amongst indies to invest and become liquid its not all about the shopfit which is important but also paying your bills on time.Ask the brand holders how long they have to wait for their money and people would be shocked. Sadly the amount of indies who seem to think that a great shopfit is an excuse not to invest into the working capital of the business because thats the brand holders job is too many.

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