BusinessCorporate FinanceFDs face three-month wait for bank funds

FDs face three-month wait for bank funds

Liquidity injection given to high street banks could take three months to turn into short-term funding for business

tesco

Delivery duties: Tesco has extended its payment terms to 60 days

FDs of businesses supplying corporate giants are in for a tough three months
before the liquidity injection given to the high street banks filters through to
short-term funding for overdrafts, remortgaging property and commercial loans.

Martin Williams of
Graydon
issued the warning after Tesco came under fire for extending its payment terms
to its suppliers to 60 days.

He said: ‘The liquidity situation is going to get serious. It’s going to be a
good three months before the banks put the money back into the system.’

The financial crisis has seen funding dry up between banks, which has had the
knock-on effect of the lenders tightening up the borrowing available to their
business clients. These smaller companies have been put under even greater
pressure of folding as large companies including Sainsbury’s, Asda, Tesco and
Argos extend the amount of time they wait before paying invoices.

‘There has been a general indication that more and more of the larger
organisations are doing this,’ said Williams. ‘They are looking to improve their
bottom line result and cashflow by putting the squeeze on suppliers of all
sizes.’

Brian Shanahan of cash flow consultants REL said: ‘The fact that Tesco and
others are trying to extend terms to 60 days is no surprise. We already have
Argos extending terms to 105 days and other retailers are attempting similar
strategies.’

Payment terms of 105 days could see companies waiting 135 days for payment in
the worst cases because clients could exercise their right to pay a month after
receiving the invoice.

Shanahan added that the tough stance taken by the big corporates could see
suppliers going under.

‘At best, they’ll damage their relationship with these smaller suppliers.
Some may even walk away from the relationship. At worst, Tesco’s actions could
even put some of their suppliers out of business.’

Related Articles

Grant Thornton recruits new corporate finance partner

Accounting Firms Grant Thornton recruits new corporate finance partner

10m Emma Smith, Managing Editor
Total fraud value at £2bn five-year high, finds BDO

Accounting Firms Total fraud value at £2bn five-year high, finds BDO

11m Stephanie Wix, Writer
MHA MacIntyre Hudson appoints corporate finance director

Accounting Firms MHA MacIntyre Hudson appoints corporate finance director

11m Stephanie Wix, Writer
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
KPMG announces senior partner promotion in Newcastle

Accounting Firms KPMG announces senior partner promotion in Newcastle

11m Stephanie Wix, Writer
Independent city firm reports 70% growth

Accounting Firms Independent city firm reports 70% growth

11m Stephanie Wix, Writer
Tax avoidance crackdown sees 80% jump in additional HMRC revenue

Accounting Firms Tax avoidance crackdown sees 80% jump in additional HMRC revenue

11m Stephanie Wix, Writer
Making Tax Digital: the "unexpected item in the bagging area"

Accounting Standards Making Tax Digital: the "unexpected item in the bagging area"

11m Stephanie Wix, Writer