Offering payment plans to customers

[DAN WORSLEY]

Hello, Iv just joined the community tonight hoping to seek some advice!

I have a small company that offers installation and maintenance of burglar and smoke alarm systems. My company is a private limited company with me being the sole director and the only employee within the company.

Many times I've been asked to quote to install an alarm system and the customer has decided to not proceed with the price, when I've asked for feedback it's usually because the customer did not have a clue how much it would cost for an alarm system installation and could not afford it at that time. There has also been more than a few occasions where a customer has asked if a system could be paid in installments. I've done a small amount of research into this and I have found that most companies in my field do not offer credit or repayment plans for their services, so I'm wondering if this is something I should consider. Could it potentially make me stand out in the crowd?

So, let me give you an example of what I would consider in offering my customers in terms of a repayment plan...

Say I quoted to fit an alarm system for you, for example £495. You decided you didn't want to spend that much, so I gave you the option to pay for the system in installments, interest free.

The payment plan for £495 would be set to be paid over 4 installments. The 1st installment of £150 would be taken when booking the installation, refundable if cancelled before the installation is carried out. 1 month after the installation has been completed the customer would then begin to pay 3 monthly installments of £115. That's it.

Now, would I need to be licensed with the FCA to do this and hold any additional insurance policies purely for this? Is there anything else I would need?

Your opinions will be greatly appreciated.

Many thanks
Dan

 

[Mark T Jones]

The FCA website will give you an answer to this

B to c isn’t my thing, but my reccolection is that you don’t need a licence if they are repaying in fewer that 12 monthly payments (don’t take my word for it though)

 

[DAN WORSLEY]

That's what I was thinking, but I also can't say for sure. That's why I thought I better seek advice first. The FCA website is a bit of a minefield to be honest! Thanks for your input Mark

 

[Mr D]

The FCA website will give you an answer to this

B to c isn’t my thing, but my reccolection is that you don’t need a licence if they are repaying in fewer that 12 monthly payments (don’t take my word for it though)

Yes, I had heard that interest free, short term payment was much easier to do than offering credit terms like the finance companies do.

Pretty sure its come up a time or two before. OP - may be worth searching the older posts.

 

[DAN WORSLEY]

Thanks Mr D, will have a search

 

[The next Steve Jobs]

Stuff that costs more than £300 is often paid for in instalments

Especially boring but important stuff, white goods, alarms etc



KEY FACTORS

You may still find that many potential customers fail credit checks or baulk at form filling.

The potential loss of custom due to not having a theoretically perfect instalment system in place is probably half of ' the yeah but no' losses you are percieving...bear that in mind when considering the overall costs and benefits of moving forward with finance.


Can't afford X is sometimes a polite way of saying I Don't want X



Your sales pitch

well I don't know about you but I don't mind stumping up X pounds to protect 100X pounds ... i can take a deposit right now and pop back in a month or so to do the install if you like, give us both a chance to clear the decks ... it's a busy month for me anyway

Getting a commitment

Putting the customer in a place of financial ease ( not boxing them in )

Caveat : this only works if you offering them genuine value for money


One does not want to arrive for a 'down the road install' only to be greeted by a sheep dog relative of the family with folded arms demanding a refund of deposit....offer genuine value for money...trade profit margin for market share ... Don't get pushy/greedy



Last but not least

Can offer them dummy alarms and an advice brochure ... foot in the door and follow up with a more in depth consulation with view to upgrading.

Your pitch...if your worried I have a dummy alarm lurking in the back of the van I can install it now ... that will help deter some types of opportunistic thieves ... Can't beat a full fat alarm system though ... once it's done it's done.

 

[Nochexman]

Now, would I need to be licensed with the FCA to do this and hold any additional insurance policies purely for this? Is there anything else I would need?

Hello Dan, by offering credit in this way you would need to be regulated by the FCA.

What you propose does sound interesting, but beware that someone who can't afford to buy your product upfront is more likely to default on their installments later.

 

[Mark T Jones]

@DAN WORSLEY Have you tried calling the FCA?

I think this page is relevant to you https://www.fca.org.uk/firms/authorisation/when-required/exemptions-exclusions/installment-credit

 

[Gordon - Commercial Finance]

B to c isn’t my thing, but my reccolection is that you don’t need a licence if they are repaying in fewer that 12 monthly payments (don’t take my word for it though)

I've got it my head that its 4 monthly payments or less. But also not my thing so don't take my word for it either!

Personally, I don't think you will be missing much business by not offering a payment plan. Anyone who can't even save up for a couple months to scrape together £495 is likely to struggle to honour their agreement with you, so would probably be significantly more hassle than they are worth. In my humble opinion that is of course.

 

[Mark T Jones]

Personally, I don't think you will be missing much business by not offering a payment plan. Anyone who can't even save up for a couple months to scrape together £495 is likely to struggle to honour their agreement with you, so would probably be significantly more hassle than they are worth. In my humble opinion that is of course.

This does, of course raise the issue of collections, which is a different level of FCA authorisation!

 

[Nochexman]

@DAN WORSLEY Have you tried calling the FCA?

I think this page is relevant to you https://www.fca.org.uk/firms/authorisation/when-required/exemptions-exclusions/installment-credit

Good observation; I think the poster needs to check whether they are designated as offering "a conditional sale or HP agreement".