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www.IndependentRetailer.com MANAGEMENT Banking Relationships and Turnover
UNTIL THE fall of 2008, obtain- ing or extending a line of credit with a bank, or even getting a small business loan, was a rela- tively painless process. Now, in 2011, the banking environment poses challenges for retailers looking for fi nancial assistance. This article presents both sides of the equation, as well as tips on what you can do to improve your banking relationships.
The Retailer’s Perspective
One retailer told me he, “hasn’t felt much like a customer lately,” when describing his long term banking relationship. Other
retailers have had their credit lines reduced by as much as 30 percent, even if they weren’t currently being used. In another instance, a bank wanted seven fi gure life insurance policies on both the owner and his wife, in order to secure fi nancing for a particular project. One store I spoke with shared that his bank wasn’t even interested in his inventory as collateral, and would only take real estate. Per- haps the most disturbing case, however, involved a bank de- manding more collateral from a retailer, or risk having the note “called.” In the eyes of
this bank, more collateral meant more inventory, since inventory to the bank is an asset. This was a slow turning store that kept inventory levels way above optimum levels. They also re- sisted taking markdowns on old goods, for fear the bank would get nervous when lower gross margin fi gures were discovered. The store felt they were actually being forced into making bad business decisions.
The Bank’s Perspective
Even though there have been recent indications that banks
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110 September 2011
INDEPENDENTRETAILER
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