How the Credit Crisis Affects Retailers

Retailers typically fund their businesses with short-term lines of credit and long-term loans that usually require the company to meet certain financial conditions. If they don't meet them, the banks can call in the loans. Retailers also can borrow for the short term against money due from customers or against their inventory, or long term in the debt markets by issuing bonds.

"A credit crisis is the last thing retailers need facing this already grim holiday season," says Carol Levenson, co-founder and director of research at the bond research firm Gimme Credit.

The retailers that need to ask their banks to waive the requirements they must meet will be most at risk, says Levenson, because "the banks might be less lenient in the future."

Mid-level retailers, many of whose customers are cutting back on discretionary purchases and trading down to discounters, will likely be in the toughest spot, says Michael Dart, a strategist with the retail consulting firm Kurt Salmon Associates.


Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.