Supermarkets are being accused of “abusing their powers” and threatening the closure of small businesses by offering them bank loans instead of payment of invoices.
Chains including Marks & Spencer have introduced schemes that delay payments to SMEs that supply them with goods, reports the Daily Mail.
Suppliers have to wait up to a month longer to have their bills honoured, but if they cannot hold on this long, the supermarkets offer them access to credit from a bank, the newspaper said.
M&S increased the waiting time for suppliers before their bills are settled from 60 days to 75 for clothing and ‘general merchandise’ in 2013.
The news follows reports in February that an official investigation is to be made into Tesco to find out whether the supermarket giant broke the grocery industry watchdog’s rules, including through delayed payments to its suppliers.
Tracy Ewen, managing director of IGF Invoice Finance called on the government to introduce stronger regulation to protect SMEs.
“Credit alone is not a bad thing; forcing suppliers to accept credit or face going out of business is. For many small businesses this is not a sustainable practice, yet it is a reality that they have very little power to change,” she said in a statement.
“Many SMEs are facing intense cashflow pressures from abuses of power by some of the UK’s largest companies- including the supermarkets. If nothing changes, we may see small companies fold unnecessarily. This could have a severe impact on how the supermarkets themselves are able to operate – and could also have a knock-on effect on the economy as a whole.
“For those firms mired in long payment terms, there are options available that cover the gap between work completed and money in the bank. It’s therefore important for firms to thoroughly review their options and make use of any free financial advice that their financial partners and suppliers can offer before allowing pressure from large customers to impact their growth or operations.”