Supermarkets have been accused of 'bully boy tactics ' by offering their suppliers bank loans instead of swiftly settling their debts . Chains including Morrisons and Marks & Spencer have introduced schemes that delay the payment of invoices to small businesses that supply them with goods . The suppliers have to wait up to a month longer to have their bills honoured , but if they can not hold on this long , the supermarkets offer them access to credit from a bank . It pays the money earlier than the supermarket would – but charges interest on the loan . Supermerket chains have introduced schemes that delay the payment of invoices to small businesses meaning many farmers will face a cashflow crisis . Critics say such schemes force small firms to pay through the nose to get money that should have been handed to them promptly in the first place . Phil Orford , chief executive of the Forum of Private Business , said last night : 'This is yet another ethical deficit at the heart of some of Britain 's most well-known companies . Their apparent collusion in this area threatens to break the backbone of the UK economy – small businesses . ' Morrisons , for example , has a 'supplier finance ' scheme with Lloyds Bank . Under arrangements introduced late last year , most of the supermarket 's suppliers have been persuaded to wait 90 days for their invoices to be paid , a month longer than previously . Those that can not hang on that long are directed towards the deal Morrisons has drawn up with Lloyds . The bank will give them their money sooner in the form of a loan . Morrisons has a 'supplier finance ' scheme with Lloyds Bank . The bank can give suppliers their money sooner in the form of a loan . Lloyds earns interest charges , Morrisons keeps the cash it owes in its coffers for longer – and the firms pay to get their money . A Morrisons supplier , who wished to remain anonymous , said it is the latest example of big business using 'bully-boy tactics ' to make an extra profit . The practice is legal , but the supplier said it can be the difference between some small businesses surviving or failing . Mr Orford said : 'There is a growing trend for large businesses to use supply chain finance to extend payment times and pass the cost of credit down to their suppliers . 1 A supermarket decides to buy apples from a farmer and agrees to pay him £10,000 every month . 2 A year into the contract the supermarket says it is keen to work with the supplier for another 12 months – but rather than settle the invoice monthly it would prefer to hang on to the cash for longer and delay payment to 90 days . 3 The farmer doesn ’ t want to upset the supermarket but suddenly finds himself with a cashflow issue – if he can ’ t pay his bills his business could collapse . 4 The supermarket comes up with a solution . It has devised a scheme with a bank that means the farmer can get paid even quicker than 30 days but at a cost . A bank will pay the money owed in the form of a loan , but will take a fee for providing the cash ‘ early ’ – typically interest of 1.2 per cent , or £120 per month . 5 So the farmer only receives £9,880 rather than the £10,000 he is owed . 'This is a process which , whilst reducing their own costs , also makes money for the bank supporting the scheme . ' The finance deals are not compulsory , but many suppliers feel it is an offer they can not refuse for fear of losing business . One supplier , who asked for anonymity , said Morrisons and others are being opportunist introducing the schemes at a time when interest rates are low . He said he fears they will rocket when borrowing costs start to rise , but by then small firms will be locked into costly deals . Morrisons ' deal with Lloyds allows the supplier to receive payment earlier if they pay interest at 0.75 per cent above the Libor benchmark rate , currently 0.27 per cent , meaning a charge of 1.02 per cent . Other grocers offer similar schemes , but they are not tied to suppliers agreeing a lengthening of payment terms . Marks & Spencer offered a scheme with HSBC and Royal Bank of Scotland , offering borrowing rates of 0.95 per cent above the Libor rate . M & S increased the waiting time for suppliers before their bills are settled from 60 days to 75 for clothing and 'general merchandise ' in 2013 . Food suppliers wait between 19 and 39 days . Morrisons said : 'If suppliers do n't want to take part , they do n't have to . ' Lloyds said the deals let suppliers get cash at low cost , and helps businesses to 'free up capital to invest in their business ' . Marks & Spencer said : 'We have only received positive feedback from suppliers that participate . ' Sainsbury 's , Tesco and Asda also offer similar schemes , but Waitrose does not .
Morrisons and M & S have introduced schemes that delay invoice payment . Supermarkets have been accused of 'bully boy tactics ' by offering loans . Suppliers have to wait up to a month longer to have their bills honoured . The government has also announced plans for an inquiry into the impact on consumers if supermarkets are forced to raise prices in order to pay suppliers.