Credit insurer Allianz Trade has slashed cover for Boohoo suppliers, which could hit the online retailer’s cashflow.
Cover has been cut by an average of 50%, with some suppliers to the fast fashion retailer having their coverage level cut to zero from September, according to The Sunday Times.
It follows credit insurers cutting cover for fellow fast fashion giant Asos in May.
Credit insurance protects suppliers against the risk of their client going bust before payment is received for products that have been ordered.
When cover is unavailable, many suppliers demand payment for goods upfront, which can impact a retailer’s cashflow.
A Boohoo spokesman told the newspaper: “With the credit insurance capacity less than 50 utilised, we wouldn’t expect any real impact from the reduction.”
As of February, Boohoo had a net cash position of £5.9m and has access to a £325 million revolving credit facility.
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It comes as Boohoo puts pressure on supplier to cut costs. In May, the online fashion firm asked suppliers for a discount on delivered and undelivered clothing.
The retailer has particularly targeted its Turkish suppliers. It has asked them for a 30% discount on outstanding orders as it looks to achieve the same level of cuts it has with Pakistani partners.
The retailer plunged to a £90.7m pre-tax loss in its full-year to February 28, as shoppers deal with the ongoing cost-of-living crisis and flock back to physical stores post-pandemic.
Sales slipped 11%, or 9% in the UK, but Boohoo said it expects performance to improve in its current financial year.