Peek & Cloppenburg’s insolvency indicates difficult operating conditions for fashion retailers in the post-Covid environment
5. ožujka 2023.3 najveće zablude kod izrade poslovnog plana za banke koje poduzećima umanjuju šansu za odobrenje kredita
8. ožujka 2023.Access to revolving credit lines (RCF) is vital to many companies, so it is for Just Eat Takeaway(.)com (JET), a food delivery platform. Luckily, JET has been flooded with money from its investors, so their liquidity has not been under pressure, at least not yet.
JET has amended its RCF in August 2021, when the amount was reduced, which was unusual given the company’s revenue growth to EUR 4,5bn, improved liquidity, and securing another bank loan.
In addition, they obtained a waiver for not having to perform covenant testing for periods from June 2021 to December 2022, however, in return they were not allowed to draw on the facility!
It has to be said that covenants were not tested probably because they would be breached due to the acquisition and expected weaker results during that period. However, it is unusual for the bank to not allow to draw under the credit line.
Covenants serve as early warning signs of credit deterioration and they allow a bank to react before a company defaults. This bank has decided to do just that – to react in order to save its money. However, not allowing to draw on the facility shows they do not believe in JET’s business model. JET’s results are far from good, however, they were not much better a year before when the company was allowed to draw the money.
This example shows the risks of overreliance on short-term bank credit lines, because they are here today and might not be there tomorrow. Therefore, it is crucial to pay attention how working capital is financed and which credit rating your company has, because you might easily lose the previously approved credit lines, which you seriously count on.
