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Price Club aftermath
Suppliers call for factoring service

By Miriam Dunn

Suppliers and traders may well decide to push banks to make a factoring service available to them, in the wake of the sensational Price Club supermarket crash.

The practice of factoring involves a company which is engaged in the business of financing accounts receivable – often a bank – assuming the credit risk of account debtors and receiving cash as the debtors settle their accounts.

Tony Zammit Cutajar, whose company, P. Cutajar and Co. Ltd, like many others, suffered the biggest loss ever in its 135-year history of trading, said he would like to see the banks play a role in helping traders achieve more secure trading conditions.

"The only people in Malta who take collateral are the banks and in line with this, they always take a position of privilege, lending without taking any risk," he said. "They might lose out in a forced sale situation, but they certainly had a great advantage over suppliers who ended up as bankers themselves."

Last Friday, the majority of the Price Club’s creditors, who are owed around Lm8.5 million, opted to file a case in court for the supermarket chain to be liquidated.

Mr Zammit Cutajar, who is interviewed in today’s edition of our newspaper, said that in the aftermath of the Price Club saga, banks should be willing to play a vital role in reforming some current business practices and ensuring enough groundwork has been done about the viability of certain projects.

"In the supermarket business, the gross margins are nowhere near as high as they are in other retail sectors - most supermarkets operate at a gross margin of about 15 – 17% - which makes it especially important that calculations are done properly before going into business," he said. "In line with this, I have written to HSBC and suggested that they start a factoring service, since they have a similar set-up operating in the UK.

"I have now been informed by HSBC Malta’s chief executive, Tom Robson, that they have given it some thought in the past and will consider it again next year. That will help us achieve more secure – albeit at a charge – trading conditions."

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt