Support for retailers with increased credit limits on fuel bonds made available
With the conflict in the Middle East continuing to drive oil prices upwards, additional pressures are being put on the credit limits of independent retailers and their fuel supplier.
The credit limit and payment in terms in place between fuel suppliers and retailers isn’t always too flexible, and just because the invoice cost rises in line with global oil prices, it doesn’t mean a retailer’s credit terms will reflect.
Credit limits are often fixed and generally based on a review of the latest accounts posted to Companies House, with a bank or an underwriter from a third-party insurer taking a view on the risk. No doubt, this will all lead to some difficult conversations between fuel suppliers and retailers, with the former asking their retailers to pay early; a reduction in direct debit collection dates or providing additional security in the form of cash deposits, bank guarantees of property charges.
Providing payment guarantees to fuel suppliers on behalf of their retailers, Franchiseefirst have offered to ‘top up’ all fuel bonds at no cost, to allow credit limits to flex with the price increase. The organisation believes the decision on credit limits and payment terms should be made between the fuel supplier and retailer and not a third party which doesn’t know the business.
Working with retailers across Ireland with Circle K and Applegreen, they have offered to increase the credit limits on all fuel bonds for retailers/dealers free of charge. This allows supply to continue between the retailer and oil company without having to apply for extra credit or put down cash deposits to cope with the increase.
To date, they have provided top ups to independent retailers of over £1 million of additional credit free of charge to protect cash flows.
“I’ve been at the sharp end of price spikes previously and know how difficult it can be to maintain fuel supply in a market where the next order can cost £000s more than the previous delivery,” said Luke Baker, from Franchiseefirst.
“This consequently sends the outstanding balance over the credit limit and the account is placed on-stop. This creates a scramble where retailers are asked to pay a previous invoice early or provide a cash deposit as security. This can be a double whammy as dealers work on reduced margins as the price surges, so cash flow can tighten dramatically.”
As the political situation remains tense and markets react accordingly, the rising prices are likely to continue before there is any sign of a notable reduction.
