Retailers risk losses in the thousands if they are not properly covered against theft or equipment breakdowns. Alex Yau investigates what to look out for when taking out finance or renewing insurance cover
Rikul Patel, Mutual manager at The Retail Mutual
Run by the NFRN, The Retail Mutual specialises in providing insurance to independent retailers of different sizes. The provider is owned by its customers, and retailers, rather than shareholders, will get a share of its profits at the end of each year.
Don’t wait until something happens before taking out insurance cover
We find a lot of retailers don’t take out insurance because they think nothing is going to happen to them, but this is the wrong mind set. More than a third of claims we receive are for shop theft, but a lot of retailers don’t consider the long-term impact. Shop theft is our most common claim and can happen when least expected. A retailer might lose £2,000 worth of tobacco, but there are additional repair costs for the gantry and till area. They also have to try and recoup the lost stock themselves. This could be the livelihood for a small newsagent and they might suddenly find themselves out of business.
The frequency of insurance claims overall has remained the same over the past five years, but the value has increased. The combined value of stock and fixtures any retailer has now averages more than £50,000, a figure which has doubled during that time period. Store owners have more sophisticated EPoS systems, food to go areas and modern shop fronts. One retailer refitted his shop front at a cost of £20,000, but a drunk driver without insurance crashed through it. The cost was on the retailer.
Naresh Purohit, Marseans Newsagents, Dartford
Newsagents like us have had to expand their businesses to become more like convenience stores so they can compete with supermarkets. Petty theft of low-value stock used to be the extent of our problems. Now claims can be for anything from assault to high-value theft of goods in transit. I’ve claimed from the Retail Mutual and the experience was reassuring and professional.
Katie Aston, Head of insurance services at SME Insurance Services
SME Insurance Services works as a broker on behalf of more than 21,000 small businesses in the UK to find cover for issues such as accidental damage and stock stolen in the middle of a delivery. Providers it works with include AXA and Liverpool Victoria.
Make sure your employees are covered
According to recent research, more than 4.9 million small businesses in the UK don’t realise they’re illegally running their company without the required insurance cover. Retailers are by law required to have employers liability insurance (ELI), which provides protection against compensation costs which may arise from a staff member falling ill or becoming injured. Store owners can be fined up to £2,500 for each day without ELI.
Another potential problem is not keeping your insurance up to date with the changing needs of your business. Too often, a business will set up cover at the start and simply renew it every year, without checking and updating it. Retailers will have made changes to their businesses since first taking out cover, which includes expansion or holding extra and more expensive stock. It is changes like these which might not fit in with the agreed terms of your original contract, and could lead to a claim not being paid in full or in part if you are underinsured.
Rob Orme, Marketing manager, Franchise Finance
Franchise Finance helps independent retailers with funds of between £5,000 and £500,000 to help with their business growth, which includes investment in a new convenience store or the equipment needed to create a chilled section.
Be honest with your provider
Some applicants for funding think that holding information back, such as previous missed loan payments, will enhance the likelihood of successfully arranging finance. This is not the case. Lenders go to great lengths to understand applicants and their businesses. When the truth comes out, the applicant can find themselves on the back foot.
You can gain a provider’s trust by providing financial projections based on evidence and not guesswork. Lenders need to be confident they can make back any investment within the agreed terms.
Applicants need to show a lender that sanctioning their application is a viable risk to take. Retailers should provide the lender with full personal details, including directors of the company, readily available business financials, management accounts and information, costs and supplier information. It is a case of being as prepared as possible and providing as much of the requested information as you possibly can at the first time of asking.
Alex Afek, Director, Got Capital
London-based finance provider Got Capital has since 2007 assisted with the investments of more than 12,000 businesses across the UK – 20% of which are retailers.
Establish a personal relationship with your provider
We’ve found that more than 90% of businesses we speak to haven’t established a personal relationship with their provider. A lot of retailers will traditionally go to bigger and more well-known banks, but there can be an absence of flexibility compared to smaller, local providers who can provide a more personal service. Whether it’s a shop theft or environmental damage, retailers might suddenly be in need of investment very quickly or need a change to their terms and it can be much easier to get this done through other finance options rather than traditional banking.
Another tip is a simple one, but still essential. Make sure you do your research into your provider rather than basing your judgement on hearsay and rumour. Compared the prices of different providers and have a proper financial plan which covers you against the unexpected.