The Builders Merchants Federation (BMF) is urging its members to take advantage of a government-backed Trade Credit Scheme to pump-prime new business.
The scheme allows BMF merchants to extend more credit to new and existing customers, safe in the knowledge that it is largely underwritten by the government. A number of BMF’s merchant members are actively using the scheme, but there is ample capacity for many more to join them.
The BMF Trade Credit Scheme gives member companies access to up to £50m of government-backed guarantees, but only £1.5m has been signed off to date to support around 75 merchant customers.
John Newcomb, managing director of the BMF, said: “The BMF Trade Credit Scheme is clearly working for some of our members, but I am astonished that more have not taken the opportunity to access these funds. I would urge those who haven’t yet taken action to apply now. It is a risk-free way to grow business and take advantage of the upturn in the market.”
Mr Newcomb added: “It could also be a case of ‘use it or lose it’ as the British Business Bank will be reviewing the scheme over the summer. If it is being well-used they will be encouraged to extend the pilot scheme beyond 30 September 2014, when it is due to end. Whatever happens, any credit facilities granted during the pilot period will remain in place for a full 12 months, effectively until September 2015, which offers a huge commercial benefit for those participating.”
Merchants already using the scheme have no doubt that it is good for business. “The scheme is a great asset to the industry, and we are keen to see it continue for as long as possible,” said Joe Tipper, finance director at Tippers. “It has helped us extend additional credit to customers across the board, from large contractors down to those needing just a few thousand pounds. We have been able to take on a lot more business – doubling credit limits in some cases and making sure that customers are trading with us at those levels. It has worked so well for some customers that we have already increased their trading level for a second time.”
Mr Tipper sees the value of the BMF Trade Credit scheme. He said: “Up to now we have underwritten every bit of customer credit ourselves so we have always limited our risk. We may have saved money by not paying for insurance, but the immeasurable part is how much business was turned away because we weren’t prepared to take the risk?
“Combined with a growing market, this was a key driver for us to participate in the BMF scheme. The market is growing at a faster rate and there are more start ups than at any time over the last five years. The trade credit scheme enables us to be more flexible in funding existing customer growth at a higher rate of trading, and allows us to trade with new customers for a full 12 months and develop confidence in those relationships.”
Another early adopter, LBS Builders Merchants, is equally happy to use the scheme to top-up existing credit insurance arrangements as financial director, Philip Evans explained: “In recent years it has been more and more difficult to get trade credit cover for all the customers we want to insure. The BMF scheme allows us to extend more credit to new and existing customers, and the extra business generated should far outweigh the cost for each credit facility. It’s good for us and for our customers. The extra credit facility means we all have the opportunity to increase our business.”
Mr Tipper has further reassurance for anyone concerned about the red tape involved in the application process and ongoing administration. “If you have sensible credit control procedures in place it is not an arduous process to get approved on the scheme,” he explained. “The process is flexible enough to take account of different arrangements companies may have in place. Each customer’s credit limit can be set up by email, and if you opt for a fixed amount of credit the admin thereafter is minimal and the annual cost, at 2% of the sum underwritten, is far lower than standard credit insurance.”
For more information on the BMF’s Trade Credit Insurance Scheme, contact Mike Fletcher on 024 7685 4985 or via email at firstname.lastname@example.org.