NMBS has made the decision to increase the discretionary credit limit for its merchant members to £3 million – double the previous limit of £1.5 million.
The move is designed to give confidence to independent builders’ merchants and suppliers alike as they continue to trade through a challenging economy. Merchants will be able to maximise even more opportunities for growth, safe in the knowledge that credit will always be available to them when they need it, while suppliers can expand their number of stockists knowing that NMBS will guarantee credit on stock purchases.
Julie Langford, NMBS Finance & Operations Director, explained: “NMBS offers a wide range of member benefits to independent merchants, but many don’t realise that credit insurance is a critical part of our model. We guarantee the debt of our members to suppliers, backed by a comprehensive credit insurance policy that is underwritten by Euler Hermes.”
During the 2008-09 recession, one of the key problems companies faced was the large-scale withdrawal of available credit to the construction industry, when credit issuers became nervous about the state of the market and decided to withdraw or severely restrict cover.
Langford explained: “We’ve seen in the past that anything to do with construction gets a bad press when the economy gets tough, and builders’ merchants are often tarred with the same brush despite being a good credit risk. During the last recession, credit insurers literally took the umbrella away when it started to rain, and we wanted to do everything we could to protect our members and suppliers from the risk of this happening again.”
After the recession, NMBS put a credit insurance policy in place which provides non-cancellable limits to its members for the entire period of the policy, which Langford says “means they haven’t got the Sword of Damocles hanging over them with regards to credit”.
This policy has proved very successful in recent years, so NMBS has now expanded the discretionary credit limit to £3 million, which covers 99% of all its independent merchant members. This means it can continue to provide credit to the industry without having to get a specific sign-off each time, provided the member meets all the relevant terms and conditions.
Langford said: “We’re doing everything we can to future-proof our members’ lines of credit. Our members can make use of this increased limit for the entire year of the insurance policy, which runs until 31 December, 2020.”
Langford explained: “We’ve been able to secure this non-cancellable policy because we’ve worked closely with our insurers, and they have all the information that they need to be happy to grant this cover for the period of the policy. That’s down to the confidence they have in NMBS’ process – we can demonstrate that we are underpinned by a secure financial foundation and our credit policies and processes are world class. We’re so confident in our procedures that we have them independently audited twice a year, even though we’re not required to do so, but we want to show to the outside world that we know what we’re doing.”
NMBS also has an extremely solid claims and credit history, with an average five-year loss ratio running at 0.002% of turnover.
“We, and our members, are a really good credit risk,” Langford added.
By providing credit facilities to more than 1,200 independent builders’ merchants across the UK, NMBS performs a vital service for both merchants and suppliers. Without this available credit, any NMBS member would have to go through the process of proving their credit limits and financial status every time they wanted to begin working with a new supplier – and those suppliers would have to absorb the credit risk themselves, without the reassurance that NMBS will effectively stand guarantee to its members’ purchases.
Langford concluded: “Since 2011 we have brought more credit into the builders’ merchant industry than any other organisation – and will continue to do so. Quite simply, our existence makes it easier for our suppliers and merchant members to trade.”
For more information on becoming an NMBS member or supplier, visit www.nmbs.co.uk or call 0116 253 0531.