Olive Beckford, centre, fashion designer and client of Jamaica National Small Business Loans Limited (JNSBL), speaks of the challenges she faces in making timely collections for goods delivered to retail companies. Listening attentively are Karen Turner, left, Mission Director of the United States Agency for International Development (USAID); Aston Barnes, second left, JNSBL director and Earl Jarrett, chairman of JNSBL and general manager of Jamaica National Building Society (JNBS). The group was on a recent tour of several business establishments that have accessed loans from the organisation.
SMALL AND micro enterprises are slowly being strangled and several are on the verge of collapse due to extended credit periods forced upon them by large businesses. Many of these small businesses have to wait up to 60 days after delivery of their goods to receive payments from retail establishments.
This discovery has been made by Jamaica National Small Business Loans Limited (JNSBL) in its efforts to support small enterprises in Jamaica.
The 30-to-60 day credit period has become a standard practice among large retailers who place orders with small businesses but insist on a minimum 30-day payment programme. Among those businesses most affected by this extended credit period are small manufacturers, such as furniture makers, and persons in the fashion industry.
This came to the fore during the recent annual tour of JN Small Business Loans Limited, a subsidiary of the Jamaica National Building Society, of several business establishments which have accessed financing through the organisation.
Maxine Mitchell, a fashion designer who specialises in baby and maternity wear, laments that she has to wait for as long as 60 days after delivering items to department stores before she receives payment.
"When you call them after 30 days, that is the time they pull your invoice to process it which sometimes takes another month. Right now I have approximately $200,000 out on the road that is owed to me," she explains.
Olive Beckford, also a fashion designer, has recently ventured into the uniform market to supplement the income she receives from her sales to large retail businesses. She also bemoans the difficulties she faces in collecting payment for goods delivered to retail stores.
"You would be surprised at some of the companies that take this long time to pay and they are the ones that can afford to pay quickly for the goods they receive," she says.
BETTER EXPERIENCE
Operator of a family-run furniture manufacturing company in an inner-city community, Clive Williams, has a somewhat better experience.
"If you deliver the goods on the first of the month, then on the first of the other month you can collect your money," he states. Although he too has to wait approximately 30 days for payment after delivery, he says he can receive payment before should he have an urgent need for funds.
The implications of this extended credit period being forced upon small businesses have serious ripple effects.
According to Frank Whylie, general manager of JN Small Business Loans Limited, the operations of these small businesses are severely inhibited by this practice.
"All their financial obligations are affected by their not being able to collect on time, in particular their scheduled payments for loans," he explains. Other effects include owners being unable to pay their overhead expenses such as rent and utilities, purchase raw material and pay staff.
Mrs. Mitchell, who supplies major department stores, has had to cut staff and reduce her output significantly because of her inability to make timely collection for goods delivered. She is appealing to retail companies to review their credit period to help entrepreneurs remain viable.
"I want to see companies, when we deliver the goods, give us a 14-day credit period or if they must have 30 days, then the cheque is ready in 30 days. This way we can budget for it and can operate our business accordingly," she states.JN Small Business Loans provides financial assistance to micro and small business entrepreneurs who are unable to secure loans from traditional banking sources.
Funding ranges from $5,000 to $200,000 with 10 to 50 weeks for repayment. Since the organisation began, after the purchase of a micro-credit loan portfolio from FINSAC in October 2000, it has disbursed over 26,000 loans valued at approximately $778 million.
