Offering finance - How does it work

[WB-EU]

Hi,


I have done a search as I thought this would be a common question but I cant seem to find much.

My other company sells high value sport goods, for the past 2 and a bit year all payments are done with either BACS or Card and I have always thought that offering finance would increase sales.

Anyway I have found a couple of companies I am going to call this week and see how it goes but thought I would get a bit of an idea by asking on here so I am not making a fool of my self!!

If for example someone buys some thing for £3600 over 12 months at 0% there payments would be £300 PM. Would I then receive this in monthly installments or would the finance company pay me and then they receive the payments?

Also is there generally a monthly charge for offering this or is it based essentially on a commission type basis as the finance company are getting the interest from my sales (of course not with 0% finance).

Thanks and sorry if these are daft questions!

 

[jake_4321]

Hello,

Finance is great option to offer customers, usually you will see an increase of 50% of your current sales when you start offering finance.

There are a few things which you need to qualify to offer finance

- How long have you been trading?
- Current annual turnover?
- Has the company ever operated at a loss?

There are many companies which offer finance, it's finding the one which is best for your business, best acceptance rate for your industry, minimum order values, interest rates etc

You will also require to obtain a consumer credit brokerage licence (£100) - This is the minimum but you will be advised by the finance company of which licence you require.

Most finance companies will charge a £400 - £600 + VAT set up fee and some may charge a monthly fee from £40 + VAT depending on which package is right for you.

If you need any guidance feel free to send me a message, we are just starting the process to offer finance to our customers.

Hope it helps !

 

[Talay]

Think of the crap sofa companies who offer you 4 years interest free plus don't pay anything for a year ! Do you think they wait 13 months to start to get your tenner a month ? Of course not.

However, with the crap sofa company, what you are really buying is an expensive loan and getting a "free" crap sofa as an incentive.

If you can't afford £500 or £1000 for something to sit on to watch the telly, then like Wonga and the expensive credit card companies, your internal interest rate is going to be sky high.

At 30% APR and 12 months payment holiday, £1000 comes out at £55.19 a month and a total of £1986.73 repayable, roughly double the advance over 4 years.

At 50% APR it triples it

 

[Moneyman]

It depends.. the concept is called vendor finance. Look it up and see what the people offer. Normally you get the cash upfront from the finance company and they take the debt.
Word of warning...make sure you are not tied down for more than a year as they drop the rates if they see quality companies.

 

[WB-EU]

Thought I would bump this up rather than starting a new thread.

I am still looking in to this and speaking to a couple of companies.

Couple of questions however as I am hitting a bit of a brick wall with it due to my turn over being around the 150k where they are asking for approx 250k.

One has said about FCA authorisation, is this needed on all vendor finance? Seems to be quite costly.

Does anyone use a company which are good with small businesses?



Thanks

 

[jake_4321]

Thought I would bump this up rather than starting a new thread.

I am still looking in to this and speaking to a couple of companies.

Couple of questions however as I am hitting a bit of a brick wall with it due to my turn over being around the 150k where they are asking for approx 250k.

One has said about FCA authorisation, is this needed on all vendor finance? Seems to be quite costly.

Does anyone use a company which are good with small businesses?



Thanks

Hi WB-EU,

Send us a PM and we can maybe advise......

Thanks

 

[WB-EU]

I will send you a PM in 10 mins Jake. Thanks

 

[WB-EU]

Bump.

Still struggling to find a company who can help. Any recommendations?

 

[ethical PR]

Do people buying high end sports gear need vendor credit - wouldn't they just put it on a credit card?

Do you have research that shows there is a demand for this amongst your target audience?

 

[WB-EU]

Yes we have done some re-search and already have 2 definite customers ready to buy the products based on 0%.

We offer a credit card service but all our competitors are offering 0% finance over 12 or 24 months which is frustrating as of course they would go to them.

 

[Mike W]

Just a few things:

• To offer finance, you will need FCA approval and (what is or used to be called) a Consumer Credit Licence.
• There is a fee just to apply to the FCA for authorisation (which may be denied).
• Thereafter, there are annual fees, which can be found here - at £150k turnover, it will be £500+
• Fee arrangements with finance companies will vary from co to co.
• Fees, like most things, will be cheaper based on higher volume of turnover. High enough and the finance company will pay you!
• If offering 0% finance, you (the vendor) are picking up the tab - ie. you pay a cost to the finance co. This will usually be equivalent to the missing interest but will vary from co to co (see above).
• With most finance companies you would usually receive the full sum less fees at the outset. Depending on your arrangement, you might be liable should the purchaser default.
• At your level of turnover, you need to be looking at the smaller finance houses or specialists in your field (some are quite focused or have areas they avoid). No idea what they're like but a quick google found www.pay4later.com - there will be lots more, I'm sure ....though I think you'll be jumping a lot of hurdles to get there.

Those are just a few points. Hope it helps.

 

[jake_4321]

Hi,

We have just replied to the PM.