Paperchase has seen its one of its key credit insurers drop its cover as its pre-tax profits dive-bombed nearly 90 per cent.
According to the latest accounts published on Companies House, the stationery retailer saw its profits before tax drop 88 per cent to £613,000 in the year to January 28.
Euler Hermes, one of its main credit insurers, has since refused to offer cover on any new contracts with Paperchases suppliers.
Insurers cut their cover of retailers when they anticipate that they may go bust before they are able to pay their suppliers.
This subsequently leads to suppliers demanding payment upfront, as they have no other assurance they will be paid, often exacerbating a retailer’s financial woes and leading to both cash and stock shortages.
“We are disappointed Euler Hermes has reduced credit insurance,” Paperchase told The Telegraph.
“We don’t think it is fair and we think they should reverse it. There is no cash issue. We have been around for 50 years and plan to be for another 50.”
Paperchase is owned by Primary Capital, the firm behind Yo Sushi and Coffee Nation, after it backed a management buyout from the now collapsed Borders UK in 2018.
During its eight years of ownership, Primary Capital has opened around 75 new stores expanding its operation rapidly, while considering both a stock market flotation and a sale in 2014.