Retailers and Christmas cashflow

For the UK’s retailers, Christmas will have started many months ago, planning and buying in the stock lines and resourcing retail and distribution outlets needed for the festive rush. A good Christmas trading period will set up retail businesses for the rest of the year, but the pressures it can place on short-term cashflow should not be underestimated.

The retail landscape continues to undergo radical and long-lasting change as the nation’s shopping habits evolve. Traditional brick-and-mortar and online retailers have not been immune to this huge upheaval.

Add to this potent mix the recent cost of living crisis, high inflation and challenged supply chains, and it is not surprising that several high street stalwarts and many more independent retailers have disappeared.

Retailers are, however, innovative, creative and resourceful and have, in many instances, been quick to adapt, change and explore new ways to reach out to their customers.

Yet as we approach ‘the most wonderful time of the year’, retailers need to ensure they have the working capital needed to withstand the challenges of the festive season.

Alongside seasonal stock, retailers need to consider the cost of any extra staffing, brand, fixtures and décor, alongside the everyday costs of marketing and advertising, insurance, energy costs and the December rent quarter.

Sometimes, retailers need specialist financial help to make the most of the Christmas trading window.

The Funding Team at Kreston Reeves see retailers explore the five potential funding options:

• Merchant cash advance – a loan where repayments are linked to the level of card transactions going through the terminals each day.
• Revolving credit – a flexible facility, similar to an overdraft, giving access to a pre-approved amount which can be drawn upon as needed and repaid when possible. Interest is only charged on the outstanding balance.
• Term loans – a simple product which can be used for many purposes. The availability and terms of these are dependent upon credit scores.
• Asset finance – used to finance equipment and fixtures, usually repaid over a set term with a fixed interest rate and secured on the asset itself.
• Property finance – such as commercial mortgages; this could also be available if you are considering purchasing retail space, rather than renting.

Retailers will find it helpful to speak first to their accountant to forecast and better understand where financial pinch points might arise and how they can best prepare for that. Independent advice is essential before agreeing to any borrowing.

For more information about how our Funding Team can help you, contact us.