offering consumer/retail finance for my customers

[Timothy Smyth]

I am looking to offer finance to my customers through a retail finance broker and/or lender. It seems there is very little on offer for new businesses with low turnover and no accounts. So far I have only found these 3 companies which *might* be suitable:

1. Ideal4Finance
2. Omni Capital
3. Payl8r

I have searched google and bing high and low, contacted lots of other companies, searched the existing posts on this forum and cannot find much on offer unless you are already turning over 500k+ with trading history.

Our products and services cost from £1000 - £8000. Most potential customers are private individuals and the majority would be willing to purchase if they could spread the cost over 12 months interest free. The majority of requests for finance are for products/services £3000+, under this amount and usually clients pay it with a credit card but there are still some that request finance under this amount.

Iv'e looked into Payl8r but i have read conflicting information. Some of the companies that use them to offer finance to customers say the maximum amount is £2000, initially on the payl8r website i saw £2500 was the maximum and then on another page of their website it stated the maximum lend was £5000 so I will need to clarify that.

Payitmonthly.uk was another option but that seems expensive and quite messy compared to the others. Some of the payment options are not 'guaranteed' which is waste of time, I might as well provide my own payment plan in that case. Anyone have experience with them ?

I really thought this type of finance market would be saturated with companies trying to get your business but it seems there is virtually nothing available, the above 3 are the only potential providers I can find.

Is this really the case or are there many more companies out there which I am just not finding for some reason ?

Also I do not plan to register with the FCA so the finance must fit within the boundaries for operating without FCA approval.

Any recommendations for companies to approach or general advice would be very grateful.

 

[intheTRADE]

HI Timothy, I may be able to help.

What type of products do you sell ?

 

[Timothy Smyth]

HI Timothy, I may be able to help.

What type of products do you sell ?

Medical products and training courses

 

[Mr D]

Are you expecting more sales if you can offer finance?

These days its easy for people to get finance themselves. If they can get the finance.
You may find those applying for whatever finance you come up with getting turned down.
Or you can lend yourself, with its own risks of course.

 

[Timothy Smyth]

Are you expecting more sales if you can offer finance?

These days its easy for people to get finance themselves. If they can get the finance.
You may find those applying for whatever finance you come up with getting turned down.
Or you can lend yourself, with its own risks of course.

Increased sales is guaranteed, I have several people right now in my pipeline that would be purchasing if finance was available.

Yes I understand people can apply for finance independently but its about creating a seamless experience for the customer within the website ordering process. It also looks more professional when everything can be completed from one website form rather than trying to ask clients to contact a random finance company or bank and then come back to us once they have the funds, its just quite unprofessional in my opinion. Considering the sort of people I deal with, being turned down would be the minority rather than the majority I suspect. Many people probably could easily pay the whole cost upfront if they really wanted to, its just a matter of not having to especially when others are offering 0% interest free payments...

I certainly would not consider putting my own capital at risk.

I just can't believe the lack of companies out there.

 

[Mr D]

Increased sales is guaranteed, I have several people right now in my pipeline that would be purchasing if finance was available.

Yes I understand people can apply for finance independently but its about creating a seamless experience for the customer within the website ordering process. It also looks more professional when everything can be completed from one website form rather than trying to ask clients to contact a random finance company or bank and then come back to us once they have the funds, its just quite unprofessional in my opinion. Considering the sort of people I deal with, being turned down would be the minority rather than the majority I suspect. Many people probably could easily pay the whole cost upfront if they really wanted to, its just a matter of not having to especially when others are offering 0% interest free payments...

I certainly would not consider putting my own capital at risk.

I just can't believe the lack of companies out there.

The only way they are guaranteed finance is if you are the one making the decision to grant it.
Which passes risk to you. Lots of businesses lent money to Carillion, without credit insurance....

 

[Timothy Smyth]

The only way they are guaranteed finance is if you are the one making the decision to grant it.
Which passes risk to you. Lots of businesses lent money to Carillion, without credit insurance....

Yes that is true.

 

[Financial-Modeller]

If your customer is going to spend £8000 on a training course but the purchase is conditional on paying for it over time, why not offer them staged payments? E.g. Level 1 is £1000, Level 2 is £2500, Level 3 is £4000.

 

[fisicx]

The reason you can’t find many offering this sort of financial service is because the risks are way too high. The finance company will need insurance and they will look at you and decide you aren’t a low risk organisation.

You said you wouldn’t put your own capital at risk but are expecting others to do so. If you are so sure your customers are good payers, put up the funds yourself.

 

[Timothy Smyth]

If your customer is going to spend £8000 on a training course but the purchase is conditional on paying for it over time, why not offer them staged payments? E.g. Level 1 is £1000, Level 2 is £2500, Level 3 is £4000.

Yes we do currently do that but we also offer all levels for a reduced price (25% off) if purchased at the same time, this is where the finance would come in handy for the people that don't want to fork out £8000 in one lump sum...

 

[Mark T Jones]

My knowledge of consumer finance isn’t up to speed but if you point me to a competitor’s sight I might be able to establish how they are offering it

As s guess I’d say that the reason you aren’t attracting lenders or brokers is simply that it’s a lot of hassle for minimum game. Most players in this market are volume-led so will chase big numbers, not individuals. Also, most reputable lenders will require you to be FCA authorised even if the specific offering is unregulated (I haven’t done a regulated deal in 4 years, but most of my lenders require me to be authorised)

Finally, I assume you are aware that the 0% is a discount paid by you?

 

[Timothy Smyth]

The reason you can’t find many offering this sort of financial service is because the risks are way too high. The finance company will need insurance and they will look at you and decide you aren’t a low risk organisation.

You said you wouldn’t put your own capital at risk but are expecting others to do so. If you are so sure your customers are good payers, put up the funds yourself.

Can you elaborate on this further ? How are the risks seen as high in this situation, why would they consider our organisation not to be low risk ? We are more than happy to provide the products and services, let the clients complete the training courses and then receive the payout from the finance company. In any case, is it the end customer who is requesting the finance that should be considered for risk, have their credit file checked over etc... At the end of the day, a loan provider will be getting repaid from our client, not us. If the person has an average or poor credit history they can simply be declined.

''You said you wouldn’t put your own capital at risk but are expecting others to do so. If you are so sure your customers are good payers, put up the funds yourself.''

I never said I am so sure that all my clients will be good payers, I would hope they all are but some may not be. This is why I am searching for a retail finance provider, they are in business to make money out of lending money, they are the experts in this field not me. They accept some clients will default, its a calculated risk that they take which is factored into their business model which is similar to a bookmakers, sometimes the bookmakers wins and sometimes the player wins but overall the odds are in favour of the bookmaker who still ultimately make a profit. I don't need to risk my own capital as a small business, suggesting that I do is not good advice.

I do now have one broker who has a panel of lenders which will work with me on the basis of paying an annual fee of around £1200 for their service. This is not ideal, but might be a temporary solution for now. They are also offering a small kickback from each approved loan. I am still keeping my eyes open for another provider which does not charge any fees.

 

[Chris Ashdown]

If a University charges £9000 pa it does make me wonder what sort of training you do for £8000 unless its similar to say professional diving course for professional qualifications

 

[Mark T Jones]

I do now have one broker who has a panel of lenders which will work with me on the basis of paying an annual fee of around £1200 for their service. This is not ideal, but might be a temporary solution for now. They are also offering a small kickback from each approved loan. I am still keeping my eyes open for another provider which does not charge any fees.

My observation here would be to assure yourself that they are a broker specialising in consumer finance, not just a bunch of chancers who will take the fee in the hope they can get a few deals through

 

[Gordon - Commercial Finance]

There’s not many companies in this game because the margins are tiny. Any business that seems low in competition would suggest there’s not much money in it.
Companies look for a business to be turning over £500k and above as that means they can get volume in. Lend £3,000 over 3 years and there’s probably only a few hundred quid in it for the lender so it’s just not worth putting capital at risk, unless they’re charging 20% or more.

I would recommend you don’t pay that broker £1,200. They have no incentive to actually get deals done for you, and in actual fact they probably don’t have that many lenders that will actually do deals for you.

 

[Timothy Smyth]

If a University charges £9000 pa it does make me wonder what sort of training you do for £8000 unless its similar to say professional diving course for professional qualifications

It is medical based and the top package at £8000 consists of multiple levels and courses.

 

[Timothy Smyth]

My observation here would be to assure yourself that they are a broker specialising in consumer finance, not just a bunch of chancers who will take the fee in the hope they can get a few deals through

One of my competition is using them, that's how I came to find them. I am sure they are a genuine consumer finance broker, just they are charging new small businesses to use them as they are probably aware there are not many alternative options around.

 

[Timothy Smyth]

There’s not many companies in this game because the margins are tiny. Any business that seems low in competition would suggest there’s not much money in it.
Companies look for a business to be turning over £500k and above as that means they can get volume in. Lend £3,000 over 3 years and there’s probably only a few hundred quid in it for the lender so it’s just not worth putting capital at risk, unless they’re charging 20% or more.

I would recommend you don’t pay that broker £1,200. They have no incentive to actually get deals done for you, and in actual fact they probably don’t have that many lenders that will actually do deals for you.

Thanks for the advice, yes i am very reluctant to to pay such a fee to this kind of broker but cannot find any alternatives at the moment. They do not take commission or fees on successful loans so like you said i suppose they have no incentive to do any hard work after receiving their £1200. All they are doing is simply passing the application to some of the lenders on their panel. I am now thinking of just providing a page within our website giving people ideas and tips how to fund our products and training, within that page would be suggesting people search for a loan through comparison sites or their own bank. The only problem is I don't want that to fall under the classification of providing financial advise and then being told I need to register the relevent governing body. Its a tricky one.

 

[fisicx]

Can you elaborate on this further ? How are the risks seen as high in this situation, why would they consider our organisation not to be low risk ?

My wife does this sort of stuff for a living. The broker will look at you and your customers. They will look at your accounts, credit history, experian data and other sources. This will give then a credit score which determines the risk. If the score is high then they will insure the loan. If not then you don't get the money. This is another reason why they want bigger businesses - there is a lot more data to analyse and more money means the risk is spead a lot wider.

It's quite a bit more complicated than this and I'm sure a financial expert will be able to explain it better - but it all boils down to a risk assessment of you and your customers. And unless you are putting a lot of business across their door they won't be interested.

The only problem is I don't want that to fall under the classification of providing financial advise and then being told I need to register the relevent governing body. Its a tricky one.

So don't do it. Partner up with a lender and put their details on your site but don't even suggest they are the best people for the job.

 

[Mark T Jones]

My wife does this sort of stuff for a living. The broker will look at you and your customers. They will look at your accounts, credit history, experian data and other sources. This will give then a credit score which determines the risk. If the score is high then they will insure the loan. If not then you don't get the money. This is another reason why they want bigger businesses - there is a lot more data to analyse and more money means the risk is spead a lot wider.

It's quite a bit more complicated than this and I'm sure a financial expert will be able to explain it better - but it all boils down to a risk assessment of you and your customers. And unless you are putting a lot of business across their door they won't be interested.

.

This will be personal loan business - checks on the introducer (for most lenders) will be cursory (mostly for comfort that they aren't about to commit fraud)

The bigger challenge is in the customer profile, which is where a broker who really knows the market will earn their keep; offering the right lender for each deal.

 

[fisicx]

This will be personal loan business.

My wife only does B2B. Credit checks are at the core of all lending. A lot can be automated I agree but this is specialist and low volume with no trading history the review will probably be manual for a while.

 

[Mark T Jones]

My wife only does B2B. Credit checks are at the core of all lending. A lot can be automated I agree but this is specialist and low volume with no trading history the review will probably be manual for a while.

Not understanding where you are coming from?

It will vary from lender to lender, but as the transaction will be a personal loan, the status of the supplier will have little or no significance