Interest Free Credit???

Discussion in 'General Business Forum' started by Stevie Wonder, Jul 2, 2013.

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  1. Stevie Wonder

    Stevie Wonder UKBF Contributor

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    I have been thinking recently about offering the option of Interest Free Credit for larger purchases.

    My thinking is that it could improve my turnover, and trying it out is at little-to-no risk.

    Has anybody had any experience of this in the past, or does anybody currently offer the facility? If so your feedback would be a great help.

    Also, I don't have a clue where to start, or which companies I should approach to lead the facility, so any referrals/recommendations would be great to.

    Thanks in advance!
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  2. Simon.P

    Simon.P Full Member

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    hi Steve,
    I would have imagined you need to have a credit license for that so you might want to start looking at that.
    Also, not sure what line of business you are in, although when you say, little to no risk it sounds like you are pretty confident people will make all the payments/only offer to existing customers perhaps?

    H
     
    Posted: Jul 2, 2013 By: Simon.P Member since: Dec 4, 2009
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  3. Stevie Wonder

    Stevie Wonder UKBF Contributor

    93 19
    Actually I was assuming that the credit payments would be down to the loan firm, and that my part would be over once the transaction was completed.

    Again I'm not too sure how it works, I know that larger companies use a third party that provide the facility, which is more what I am looking for.
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  4. Stevie Wonder

    Stevie Wonder UKBF Contributor

    93 19
    Oh, and I would be doing bathroom supply and full installation to start with. Thanks!
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  5. Simon.P

    Simon.P Full Member

    543 60
    ah ok.
    I guess you could go to website of suppliers you know who offer interest free credit and look for the t&c's and get the creditors name for ideas. Most of the furniture places might be a good place to start.

    All the best with it.
    H

    Edit:
    typed before i saw the bathroom bit. Would i be correct in saying that bathroom and kitchen supply and fitting is a nice stream of income? Certainly seems that way at most of the DIY places on the weekends!
     
    Last edited: Jul 2, 2013
    Posted: Jul 2, 2013 By: Simon.P Member since: Dec 4, 2009
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  6. Stevie Wonder

    Stevie Wonder UKBF Contributor

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    Like most/any business at present the market it saturated and business is reduced compared to 6-7 years ago.

    I thought the IFC option would bring projects back into people's budget.
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  7. Simon.P

    Simon.P Full Member

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    Indeed.
    I assume you are cheaper and easier to work with than the big DIY/home chains thou Steve. :)
     
    Last edited: Jul 2, 2013
    Posted: Jul 2, 2013 By: Simon.P Member since: Dec 4, 2009
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  8. oldoakey

    oldoakey UKBF Regular

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    The cost for any interest free deal is born by the retailer, this is then usually hidden within their pricing structure. So you would normally have to raise your prices to do it.

    The typical cost of say a 36 month 0% finance deal would normally cost you around 20% of the loan value so £200 in every £1,000. You are paid usually within 3 - 5 days of the delivery paperwork being put through direct to your nominated bank.

    The fee for the licence has shot up to £1,000 and even if you bought that it may prove very difficult to obtain anyone to deal with you for interest free credit terms. I have tried several times and not had any luck at all, unless that is your turnover is towards £1 million or more.

    Be careful of the loan companies who will set you up with finance facilities of the interest bearing kind, they will ask for a singing on fee of around £500 with no licence required as they say your covered under theirs. All their loans are interest bearing with some high rates and you would not know what rates to quote until your customer applies. In my mind most would be better approaching their own banks.

    Hope that helps
     
    Posted: Jul 2, 2013 By: oldoakey Member since: Jun 18, 2011
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  9. Stevie Wonder

    Stevie Wonder UKBF Contributor

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    Of course! If only the majority of the general public realised!
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  10. Stevie Wonder

    Stevie Wonder UKBF Contributor

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    Thanks for that.

    I assumed that a retailer would be covered by the loan providers credit licence. But what your saying does make more sense.

    Nothing's easy in small business is it?!?

    20% is a lot to hide! I thought if I was looking at 10% then the benefit of getting more work would suffice, therefore I could possibly loose this.

    Thanks again for your response.
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  11. InPrintImaging

    InPrintImaging UKBF Enthusiast

    379 80
    You would need a license - see below. It costs quite a bit and there are various hoops to jump through.

    http://www.oft.gov.uk/OFTwork/credit-licensing/#.UdLMtZywWQ0

    The other question is whether you manage your own book - ie you make the sale and collect the monthly payments, or whether you have a third party finance company do it.
     
    Posted: Jul 2, 2013 By: InPrintImaging Member since: Nov 15, 2010
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  12. Stevie Wonder

    Stevie Wonder UKBF Contributor

    93 19
    Just seen a licence cost on the ofcom website of £1466!!

    Has anybody had any success offering a service of this kind?
     
    Posted: Jul 2, 2013 By: Stevie Wonder Member since: Mar 5, 2011
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  13. InPrintImaging

    InPrintImaging UKBF Enthusiast

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    I've know a few businesses that do pretty well using it (although not myself - it isn't really suitable for my market(s)). The things you need to bear in mind though are, one the cost of the license, and two, the red tape you have to sort out in order to become licensed. They ask for a lot of data about your business before granting a license (financial information etc) in order to ensure you are a safe organization to be offering credit. This could be difficult for a new start up or very small business to provide in the early years.
     
    Posted: Jul 2, 2013 By: InPrintImaging Member since: Nov 15, 2010
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  14. oldoakey

    oldoakey UKBF Regular

    199 31
    "Nothings easy in a small business" never a truer word said. The smaller you are the less equal the playing field is.
     
    Posted: Jul 2, 2013 By: oldoakey Member since: Jun 18, 2011
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