Spending downturn has retailers surviving off overdrafts

Retailers running into cash-flow troubles are surviving off bank overdrafts, as the spending downturn pushes businesses to the brink.

Latest spending data from payment operator Worldline shows another decline, with consumers spending 3.4 percent less than a year ago.

Retail NZ said April to September was a typically quieter period, and with the economic downturn, businesses were feeling the pinch and unable to restock.

Chief executive Carolyn Young said some retailers were relying on the bank to make it through.

"A number of businesses are surviving through having an overdraft with their bank and then really one of the things that businesses need to consider is when they look at their business structure, should their overdraft be an overdraft or should it be a more fixed term facility where you're paying a slightly lower rate," Young said.

"Because obviously, if you've got a loan the rate will be lower than what it is with an overdraft."

Young said restructuring debt was one way to help better manage finances.

"You're effectively managing your finances better is really what we want to see from the conversations that the banks are having with business," she said.

Young said the cash-flow difficulties meant retailers were also struggling to ensure there was enough money leftover to buy forward stock.

"A number of businesses have said to us 'cash-flow is so tight that we don't have any spare cash and we need cash to buy forward stock to stay open'," she said.

Young said businesses often buy stock six or nine months in advance.