Suppliers reluctant to ship goods without credit insurance | National News

Trade credit insurance provides a financial backstop for at least $600 billion in annual U.S. sales, according to Robert Litan, an economist and attorney, who published a report in early July on the issue for Econ One, an economic consulting firm. That doesn’t include the estimated $50 billion loss in orders that suppliers will be too reluctant to ship, Litan estimates.

Without the safety net, these suppliers — 60% of which have revenues of $20 million or less, according to Litan — are starting to make hard choices about whether to maintain their current production level or cut back on orders to minimize the risk, experts say.

Rotstein says his credit insurer hasn’t pulled back coverage on his accounts with big retailers like Amazon or Dollar General but it’s cut back or eliminated coverage for mom-and-pop stores and many non-essential chains he declined to name.

“Credit insurance lubricates small businesses—it is the lifeblood,” Litan said, noting that credit insurance is a prerequisite for companies to maintain credit lines with banks in order to continue operations and avoid further disruption in their supply networks.

Linda Wolff, owner of CPW, a women’s clothing store that has been in business for 30 years on Manhattan’s Upper West Side, said her fashion suppliers want her and other store clients to prepay or pay with a certified check, instead of paying them upon receiving her orders. With business down more than 60% since she reopened her store in June, she is worried that she won’t be able to keep up with payments and also stock her store with enough merchandise.

Read More: Suppliers reluctant to ship goods without credit insurance | National News

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