- For those companies looking to help their clients finance purchases of their product and services, the last few years have been difficult. While these customer financing programs are still out there, there has been a pull back by many of the largest banks in the wake of the credit crisis with regard to the types of products and industries that they will finance or “buy paper” for.
Furthermore, most large banks business model dictates that they will not even talk to a company unless they are doing over $100 million per year in sales.
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In the middle, are literally thousands of small and medium size businesses who are watching their customers walk away from dealers, showrooms, and even websites, simply because they don’t have the credit to pay for a purchase. Many of these same consumers also are suffering from restricted credit limits on their personal credit cards.
However, there are options for this large group of companies. Silverstreak funding, through a unique referral relationship, offers retail financing programs for a wide variety of industries that sell both products and services.
There a few key things to remember about retail finance programs in the “new” credit environment:
- many companies want to fund customers with difficult credit. This can still be done, but the company will usually pay a “discount” on every deal. Essentially this means the finance company may only pay a portion of the every finance contract written, leaving the company or dealer to fund the remaining balance. This is a way of hedging risk for various credit profiles, but what a company needs to consider is whether they have enough profit margin in the product for this to still be worthwhile from a profit standpoint. For example, a 20% discount on a given deal means only 80 cents on every dollar will be taken on by the finance company, leaving the remainder to the organization selling the product. While this isn’t the case for companies who don’t wish to fund consumers with difficult credit, its important to remember if your customers are usually in the middle to lower end of the credit spectrum.
- Even “good” credit borrowers are going to pay high rates. In today’s world, even somebody with excellent credit may have to pay rates as high as 29.99%, depending on the product, service and other factors. While such a high rate is not typical, it is not entirely uncommon either, due to the extreme caution surrounding risk of default in today’s marketplace.
- Non-Recourse programs are definitely still out there in abundance. Non-recourse means that companies will not have to pay the finance company in any way should the debt go bad. For those companies who are willing to take some of the “bad debt” risk, a partial recourse program may afford you more options in regard to lower rates, higher approvals, etc.
- “Non Standard” companies doing at least $1 million per year in sales have more options than they thought. At this point, non standard for a larger bank is just about everything outside of appliances, heating and air conditioning and a handful of other products. More important than the product itself is the sales figures of the company that is seeking a financing program.
Contact us at: info@silverstreakfunding.com