Interest Free Credit

[deniser]

Is there any easy way of offering interest free credit to customers without needing consumer credit licences etc?

I know we can take payment in instalments but then there is a big delay in the customer receiving their goods so need a system where they pay in instalments afterwards but don't really want to be chasing them for payment. Maybe something like a low cost factoring service?

Any ideas?

 

[Mark T Jones]

Are you selling B2B? What is your average deal size?

You will need a Credit Licence to offer interest free - also, you may find it costs more than factoring

The circumstances will dictate the best solution..

 

[Ian J]

I doubt whether factoring will work as that only applies to sales made on normal trade credit terms and not instalments but what you are looking for is the pretty standard sort of hire purchase or credit agreement facility offered by a third party

 

[deniser]

This is B2C. Just noticing that a lot of companies in my sector - average transaction size can be anywhere between £50 and £350 - are offering informal pay in instalments - but then there is the delay in getting the goods.

Only want to do it to increase sales but not if the benefits are going to be outweighed by the costs. Might give the instalments a go and see what happens.

 

[Mark T Jones]

I don't know a lot about personal loans, but at this price range I can't help thinking that those who can't pay or stick it on a card would be unlikely to be approved (I might be wrong though)

B2c debt can't be factored. So I fear instalments might be the only option

 

[Raw Rob]

A while ago I heard about Klarna which is a payment processor based in Sweden, I don't know how popular it is in the UK and I've not looked into it properly, but they offer a buy now pay later option, and if I remember correctly, the retailer gets the money straight away. https://www.klarna.com/uk/pay-later

 

[tony84]

I dont think you need a CCL if you keep the installments to 3 or less.

 

[tony84]

Ignore my last post, I have just found this:
http://www.lawdonut.co.uk/business/...redit-to-consumers/consumer-credit-faqs#CoCr1

4. Can we allow a customer to pay us later, but not charge the customer interest, without a licence?
You do not need a licence as long as the customer will pay in four or fewer instalments, within a year of the date of sale.

 

[oldoakey]

There are a couple of companies who are offering retail finance that I know of
Divido and Ideal4finance I know Divido offer interest free but there is a sign up fee and monthly payments so not sure if it would work out for you.

Ask about Buy now Pay later - this is far cheaper for you the retailer as its interest free to the consumer as long as they pay in full before the end of the term. I have used this before and as long as you spell it out clearly to your customer about the high interest if they go over the term then they pay no interest at all. Look them up on Google.

I think from memory interest free for 6 months is around 8% cost to you where BNPL is around 2 or 3%.

 

[The Byre]

This is B2C. Just noticing that a lot of companies in my sector - average transaction size can be anywhere between £50 and £350 - are offering informal pay in instalments - but then there is the delay in getting the goods.

At very high margins, this might work, but with such low sums, you are going to get many dead-beats and you will need those margins to pay for them.

at this price range I can't help thinking that those who can't pay or stick it on a card would be unlikely to be approved (I might be wrong though)

Well, apart from the fact that I stick everything on a card, as I can't be bothered with cash, you ain't wrong. Anyone who needs credit for a £50 or £100 item has to be suffering from extreme impecuniousness!

 

[deniser]

A while ago I heard about Klarna which is a payment processor based in Sweden, I don't know how popular it is in the UK and I've not looked into it properly, but they offer a buy now pay later option, and if I remember correctly, the retailer gets the money straight away. https://www.klarna.com/uk/pay-later

This looks very interesting - thank you!

 

[deniser]

Well, apart from the fact that I stick everything on a card, as I can't be bothered with cash, you ain't wrong. Anyone who needs credit for a £50 or £100 item has to be suffering from extreme impecuniousness!

Part of our business is in the wedding industry and people tend to really overspend. You wouldn't believe how many people I get ranting at me because a refund takes a few days to show up on their bank account and they are desperate for the money and actually can't buy anything at all until the refund comes through!

 

[The Byre]

Part of our business is in the wedding industry and people tend to really overspend.

I'm sure you love them to do this, but I have never understood this madness!

Our wedding involved a band from Texas called The Worms (who mostly did ACDC covers and played for free, as they were friends of mine) several crates of beer, much whiskey and wine. I made the evening memorable by going to sleep in the garden pond. The whole thing cost about £100. Well, you've got to splash out sometimes!

 

[Ian J]

Anyone who needs credit for a £50 or £100 item has to be suffering from extreme impecuniousness!

What a delightful Dickensian phrase

 

[Paul Kelly ICHYB]

I have seen a provider who offer payment (via Stripe, I think), but only take a partial payment every month. They pre-auth the full amount to reserve the funds, take the % and the next month take the next payment and pre-auth for the reduced amount etc.

 

[deniser]

I have seen a provider who offer payment (via Stripe, I think), but only take a partial payment every month. They pre-auth the full amount to reserve the funds, take the % and the next month take the next payment and pre-auth for the reduced amount etc.

That's a possibility but can one authorise funds for more than a few days?

 

[Paul Kelly ICHYB]

It isn't an authourisation, but pre-auth, so funds are not taken! Essentially you are reserving the whole/outstanding amount on a monthly bases.

The company is called splitit - I can introduce if you like.

BTW, I am looking at using them for our business.