Are bike shops getting enough credit?

Life for retailers is tough in 2011. As if tightened consumer spending wasn’t bad enough, the news followed that that banks had failed to live up to their ‘Project Merlin’ promise to lend more to small-to-medium businesses. BikeBiz posed the question: ‘Are banks still backing bike businesses?’ last month. Chris Boulton, director of Totally Bikes, responds…

“Our company, Totally Bikes Limited (www.totally-bikes.com) was set up just over a year ago to provide high quality bikes to the triathlon, time trialling and leisure markets. Through self-funding by the founder partners – myself and Matt Hodges-Long we have built a hire stock of nearly 60 bikes and five tandems. Clearly we put some seed capital into the business and due to its success with an ever-growing customer base, have been able to use cash-flow to invest in additional inventory.

Our relationship with our bank is OK, although we only have limited contact. They certainly aren’t interested in providing a loan to help us grow even though we are an asset-backed business. The last suggestion on how they might assist with debt was for us to apply for a corporate credit card to benefit from the 45-day payment period! As a new business, we have also had issues with our credit card payment platform. We take many credit and debit card payments on-line, as well as face-to-face but the provider has forced us to accept a 30-day retention on monies received. The perverse thing is that we have often processed a payment, the customer has hired the bike or tandem and handed it back and we still have to wait weeks for the cash to arrive in our account.

In view of all this, we have just got on with managing the business and continue to grow by using cash-flow, but also adopting more innovative ways of financing a growing hire fleet. We are in discussions with a number of major bike brands about collaboration and are also offering other services which throw off cash to invest in bikes, namely a bike maintenance offer and by retailing bike components and accessories.

We have had a great season so far and are completely hired out for many events with an eye now to further growth in 2012. By then some of our discussions with bike manufacturers should have proved fruitful and our bank may start to get interested.

We are also looking for other partners to help grow the hire and maintenance business into other areas of the UK and even Europe by franchising the Totally Bikes brand.

Chris Boulton
Director, Totally Bikes Limited
www.totally-bikes.com