Supplier insolvency insurance ?

[Surfiejim]

Hi, Does anyone know if there are any insurance policys that cover Supplier Failure ?

I know we can use a credit card to mitiagte loss via Section 75 but I find suppliers offer better deals if payment is made via BACS or debt cards.

Any advice would be welcome. Thanks.

 

 

[Kelvin]

There are some but it’s really expensive. I looked into for our timber kit but it was going to cost something like 15% of the value of the thing you’re insuring. 
 

I’m using section 75 for everything else but I’ve not come up against it costing me more. 

[nod]

Just pay a small deposit with your credit card Which will cover for the full amount 

[Duncan62]

54 minutes ago, nod said:

Just pay a small deposit with your credit card Which will cover for the full amount 

I think section 75 only covers a maximum of £30k IIRC.

[nod]

28 minutes ago, Duncan62 said:

I think section 75 only covers a maximum of £30k IIRC.

It does 

I wouldn’t be handing over more than 30k at the moment 

Lots of companies are struggling with cash flow 

We have two jobs on hold due to TF companies going into administration 

[Temp]

Its also very important to conform to the rules or section 75 will fail to cover you. I believe the credit card must be in the name of the person placing the order (so not your partners card). It must also be a direct transaction with the company (so might be a problem if ordering a kit from a local  representative if they don't work for the company directly). The card must also be used for a deposit on the kit not a seperate design fee or similar. 

 

If I've missed anything I'm sure someone will pick me up on it.

[Temp]

9 minutes ago, nod said:

I wouldn’t be handing over more than 30k at the moment

 

S75 might not cover something like a £10,000 deposit on a £70,000 order because the total order is over 30k.

[nod]

22 minutes ago, Temp said:

 

S75 might not cover something like a £10,000 deposit on a £70,000 order because the total order is over 30k.

I would split the order 

I definitely wouldn’t hand over 70k to any company 

We will order our windows soon and take our custom elsewhere if they are not happy to do this 

 

As a business we have more work in than what we need 

Getting invoices settled is becoming an issue 

 

 

[Temp]

Just seen that the limit can be more than £30k and potentially more than £60k....

 

https://www.legislation.gov.uk/ukpga/1974/39/section/75A

 

 

[SteamyTea]

Is it worth asking your bank.

They must deal with this all the time.

[Kelvin]

20 hours ago, nod said:

It does 

I wouldn’t be handing over more than 30k at the moment 

Lots of companies are struggling with cash flow 

We have two jobs on hold due to TF companies going into administration 

It’s hard to avoid unfortunately. Our kit is due on the 17 April and we’ve had to pay 40% over three payments with the first 10% payment last July. 

[Dave Jones]

you can also pay a deposit with your debit card and be covered  as long as you are overdrawn.

[Surfiejim]

Interesting answers eveyone, Thank you. It's time to look for the best awards card now I guess. Any Ideas? 

[saveasteading]

Others can perhaps confirm.

I don't think many major suppliers accept credit cards for big orders. Firstly they have to pay a largish percentage to the bank as a fee. Secondly the money takes a while to be cleared.

3rdly. I'm only guessing ...that the suppliers bank doesn't want to have a credit company take the money back  if their client goes under.*.. so it may be in their bank agreement that they don't accept cards.

 

* supplier issues invoice in advance.

I pay by credit card.

A few days later, 97% reaches supplier's account.

Before delivery, supplier goes bust.

I reclaim the 100%

My credit card takes the money back from some digital account in the sky, from the supplier's bank.

Supplier is more than bust and their bank loses out too.

Banks don't like that.

 

Although I am guessing a bit  at 3, I do know that no major  supplier ever agreed to card payments from us. 

 

But ask them. I suspect the worst would be a 5% supplement.

 

Our biggest supplier for decades, did have insurance. Their bank guaranteed that we would get full repayment, "without argument" if the materials failed to be delivered. I suspect our supplier had to have a large surplus at the bank at all times. They wouldn't take cards, but there were very big discounts for early prepayment. BACS usually.

 

BTW contractors, and perhaps big manufacturers,  generally make 2% to 5% profit after costs. 

 

[Gus Potter]

On 13/03/2023 at 14:16, Surfiejim said:

Interesting answers eveyone, Thank you. It's time to look for the best awards card now I guess. Any Ideas? 

Have you considered stick building a timber frame.. you do the walls and either a cut timber roof or prefabricated trusses?

 

Stick building has plenty of advantages.

 

 

[cherryfountain]

We had an Escrow bank account arranged by the kit builder when we paid for our German build to the UK .

Staged payments all worked well. Need to be FCA approved company here,

[Kelvin]

22 minutes ago, cherryfountain said:

We had an Escrow bank account arranged by the kit builder when we paid for our German build to the UK .

Staged payments all worked well. Need to be FCA approved company here,

This is exactly how it ought to be done but few UK timber kit suppliers do it. I suspect most of the smaller ones have cash flow problems such that one build is funding the next or they are simply supplying to order one at a time. I’d never build another timber kit house in the way we did again. The financial exposure is too great. 

Edited October 23, 2023 by Kelvin

[SteamyTea]

I wonder how the person that started this topic is getting on.

 

[saveasteading]

55 minutes ago, cherryfountain said:

Escrow bank account arranged by the kit builder 

That is quite expensive to administer. 

Sometimes the lender insists on an independent party inspecting the materials at the factory, again at cost.

It is an option but seems to be resisted and I think Kelvin is right....it needs financial stability right through the process, and too many UK suppliers don't have it.

 

PLUS, there are legal complexities. If a UK client doesn't pay, the contractor or supplier cannot recover the materials once fixed, but I understand they can in most of Europe....which encourages the client to pay what is due.

 

OP:   @Surfiejimwe don't think you will find insurance or be able to use a credit card.

 

Edited October 23, 2023 by saveasteading

[Temp]

The government seems to blow hot and cold on self builders. Perhaps next time they decide to encourage self building everyone should write to their MP and suggest the frame companies be encouraged to set up a low cost escrow scheme. Perhaps in partnership with lenders?

[Alan Ambrose]

>>> It is an option but seems to be resisted

 

Obviously it's more complex to administer and reduces the supplier's cash flow - so, of course, suppliers resist it.

 

Once a few self-builders insist, a supplier with good cash flow is going to figure out that escrow gives them a competitive advantage.

 

[saveasteading]

2 minutes ago, Alan Ambrose said:

Once a few self-builders insist

Good luck with your new 'union of self builders'. I don't fancy administering that with beginners joining and experts leaving all the time.

 

You have a point, that one supplier could sell this security where others cannot, but I estimate their price increasing 5%, maybe 10% for taking the Escrow option. Once they have the market, there won't be any need for tight pricing.

I don't know the cost of these systems. Is that percentage significant on a typical foundation system for example?

 

On a superstructure it's a lot of money.

 

[Alan Ambrose]

No need for a union although why not have an organisation that represents self-builders? You just need a contract with clear stages, a contract administrator to sign off the stages and a lawyer to sit on the cash and to send it to the supplier when the stages have been signed off by the contract admin. I suspect that's what happens in grown-up construction projects anyway.

 

The supplier may well book a proper sales increase (20% maybe?) by offering this facility and their competitors may lose out by the same amount. The customer can regard it as the insurance premium for guarding against the risk of the supplier going bust with their money. What's not to like? And, if you're a customer who likes to take risk, you can probably save yourself 3.5%, send all the money up-front to the supplier and keep your fingers crossed.

 

Otherwise everything stays the same unless someone decides to dig their heels in or convinces a sales manager that escrow is in their self-interest.

 

I estimated 3.5% (see below) when we all discussed this before.

 

 

 

[saveasteading]

11 minutes ago, Alan Ambrose said:

suspect that's what happens in grown-up construction projects anyway.

Unfortunately not.

Nearly everything is payment in arrears, sometimes very much so, with a large retention %.

Suppliers are at risk, unless they can pass that risk up the line.

 

Then at the end, the main contractors especially  and sometimes the end clients, try to avoid any further payment at all.

Surveyors try to cheat each other. Lawyers do well.

 

I had a client once who told me, mid project, that he never pays a bill unless he still needs that supplier.

True enough he brought in surveyors and lawyers to find an excuse to not pay the retention. Fortunately we had otherwise got the money from him earlier. Was he cross? Bust now of course.

Another cancelled £100k cheque' on delivery  after taking a delivery.

 

It isn't "grown up" in a good way.

 

I can say more on how we managed the risk on a timber frame once, if anyone wants to know. 

[Kelvin]

2 minutes ago, saveasteading said:

 

 

I can say more on how we managed the risk on a timber frame once, if anyone wants to know. 

 

Yes would be interested.