Sales Contracts w/ Finance Companies

[loaner]

I guess this would be geared(mainly) for individuals with storefronts that also sell new computers. I'm sure it could be adapted to other situations, but that would have to be left to negotiations.

I worked in the personal finance business for approx 15 years. We harped on getting new customers and a very good way to do that was setting up sales accounts with local merchandisers.

All it would take would be for you to contact a finance company and talk to the manager about doing business with them. The manager(and probably the manager's supervisor) would show up in 10 minutes. I know I did.

Scenario:
Customer walks in and wants to purchase a new computer and a few other things. They happen to notice that you have 90 days same as cash set up with a local finance company. They fill out the application(supplied by the finance company), you fax it to them, they call you back in ten minutes with an answer. You make a sale that you normally wouldn't have made, and the finance company brings you a check before close of business.

The reason this is so easy to do for them: as soon as that account gets put on the books, the finance company wants to flip the sales account into a cash loan. cash loans can be up to 40% interest, while sales accounts only hit around 18%.(if it doesn't pay out in 90 days)

I can guarantee you, if you call a finance company wanting to do business with them, you will put a few more deals down that normally wouldn't have happened.

I managed 5 different offices in two different states for the largest privately owned finance company based in the state of mississippi. If you have any extra questions, let me know.

Some things have changed since I left the business, but it never hurts to make a couple of calls if it will help out the bottom line. I have a few suggetions about solicitation also. I'll pop that in another thread sometime.

...goss

 

[Alan22]

The reason this is so easy to do for them: as soon as that account gets put on the books, the finance company wants to flip the sales account into a cash loan. cash loans can be up to 40% interest, while sales accounts only hit around 18%.(if it doesn't pay out in 90 days)

I understand the concept and have taken advantage of such financing offers on big ticket items like furniture & appliances, however I paid it off before any interest kicked in. I remember a few years ago reading stories of how people were getting deep in debt due to financing offers like this. It tempts people to spend money they don't have, then they can't pay it off in 90 days and get hit with huge interest charges. I wouldn't offer this to my clients knowing that they could possibly end up paying 18%-40% interest on the financing. Moraly, I think it's wrong and also think it contributed to alot of personal debt and bankruptcies.

I can guarantee you, if you call a finance company wanting to do business with them, you will put a few more deals down that normally wouldn't have happened.

Yeah, but at what potential cost to the customer?

Some things have changed since I left the business

I wonder how this type of financing is affected by the new banking laws. I hope they protect the consumer better.

 

[Xander]

Make sure you have a deliciously appropriate fee if they pay late.

 

[loaner]

I understand the concept and have taken advantage of such financing offers on big ticket items like furniture & appliances, however I paid it off before any interest kicked in. I remember a few years ago reading stories of how people were getting deep in debt due to financing offers like this. It tempts people to spend money they don't have, then they can't pay it off in 90 days and get hit with huge interest charges. I wouldn't offer this to my clients knowing that they could possibly end up paying 18%-40% interest on the financing. Moraly, I think it's wrong and also think it contributed to alot of personal debt and bankruptcies..

do you accept credit cards for purchases? Are you a cash only business?

Yeah, but at what potential cost to the customer?.

Someone who pays cash, do you ask them where they got the money? If they pay you $600.00 cash for something, do you worry that the money you're receiving is thier rent money?

I hope they protect the consumer better.

You're doing a pretty good job yourself.

 

[loaner]

Make sure you have a deliciously appropriate fee if they pay late.

There is NOTHING for you to pay BEFORE OR AFTER the customer has been financed. If they are approved and walk out the door, it's no concern of yours if they ever make a payment or not.


It is just information people. This is something that I know alot about and thought that I would contribute, and it MAY help someone with selling computers. If you don't want to do it....then don't frickin do it.

...goss

 

[Alan22]

I accept cash or check. I do not accept credit cards as payment for my services. You're not saying that "90 days same as cash" is the same as a credit card payment, are you? This financial product is not marketed as "90 days, same as credit card". And, you said it yourself: "the finance company wants to flip the sales account into a cash loan. cash loans can be up to 40% interest." With credit cards the consumer already knows what their interest rate. They are not suckered into cash loans with 40% rates with a cutesy "same as cash" tagline.

Someone who pays cash, do you ask them where they got the money? If they pay you $600.00 cash for something, do you worry that the money you're receiving is thier rent money?

You're really stretching. I do not prey on those that can least afford to pay for a product or service, which is what I feel this "same as cash" promotion does. All it does is entice people to spend more than they could afford in the first place. Let's call the same as cash program what it really is, a deferred interest program that prey's on the poor. In my opinion the credit card companies look like angels next to the deferred interest financiers. All one needs to do is google the term "same as cash" and read about how bad it can be for the consumer.

 

[loaner]

OK BRO....THEN DON"T DO IT....

and by they way...these people are not being preyed upon. I never financed someone with out pulling credit reports and verifying income versus outgo. finance companies always go by income/debt ratio. they never want to hand out money to you that they don't feel very good about getting back from the customer.

...goss

 

[Alan22]

Don't get your panties in a bunch. You list the pros, I list the cons. Let people make an informed decision

 

[red12049]

Don't get your panties in a bunch. You list the pros, I list the cons. Let people make an informed decision

Isn't the consumer also capable of doing that? Or do you consider yourself/us to be smarter than a consumer?

I'm not in favor of "rent to own" places, and operations like "Blue Hippo", but they are legal, at least over here. It's my choice not to operate that way. That said, it's the consumer's choice who to patronize, and what he does with his money.

There's a few sides to every argument.

Rick

 

[Mushin]

Don't get your panties in a bunch. You list the pros, I list the cons. Let people make an informed decision

Being able to offer financing is simply and option and definately something that can lead to higer sales. I don't see this as being bad for the consumer and they are given all the information... terms, interest rate, late fee infromation etc up front.

So as an optional form of payment I wold say it would be a good possibility for many people. A loan like this could be a better interest rate than a credit card.

Some have mentioned the moral side of the business of consumer loans and that that they would not want to offer this type of financing. Looking at it from a business perspective.. as long as the company is reputable and makes the terms fully transparent what more can you ask for?

After all the customer is the one ultimately responsible for making and informed decision once all information has been laid out on the table. This same reason is why all your consumer eletronics, clothing chanis, and such have private lable credit cards.

One other aspect is that the initial interest rate is based largely upon the customers credit score which indicates the likelyhood that the customer will default on the loan... so if the rate is high it is because of past credit usage.

Overall, something like this is not something I would offer simply because I do not sell computers or larger ticket items. However, If I did.. it would be something that I would like into especially since competitors are doing the same thing. Im my area the rent to own places offer computers and many people take advantage of their financing as a way to get a new computer.

There is a lot to consider but from a pure business standpoint there is really no risk to the business and if can help you fill a need that exists for people that would like to get a computer on credit.

 

[lassenpc]

Doesn't sound bad to me; Loaner - how would I find a local finance company for our customers? Thanks!

 

[skdmaster]

In our store we use to do this very service. It does have pros and cons. What we liked about it was the person filled out a short form and we faxed it to the loan office. They would call us back in a few minutes to lets us know approval and how much they were approved for or if it was declined. From that the person could purchase up to the limit given and we just submitted it to the finance company and were paid in full from them. We didn't worry about anything else in the way of money or payments all of that was handled by the finance company. Now for the con part - if a customer was thinking of doing financing we would ask them how their credit was because it had to be decent to even get approved and had to have a good debt to income ratio to get a decent approval amount. We stopped doing the financing because we eventually got to the point were it was a waste of our time. For every one person approved we would have 15-20 denied. Now yes that is the person's fault and the finance company doing it's job to protect themselves but it was a huge waste of our time. This was a few years back when we did it and I can only imagine how much harder it is today with the credit crunch.

I can only recall of a few people who really took the financing to make use of the 90 days same as cash offer - most of the time they just took the normal monthly payments as they didn't have the money to pay it off in 90 days.

If you want to check it out I recommend looking around for some of these places that do personal loans but not like the paycheck places or those types of loan sharks. The company we use to work with has since been bought by citifinancial so I am not sure if they still do it or not but just call up a few most reputable names and just ask them and see.

 

[loaner]

check your local paper for businesses that want to loan money for back-to-school purposes, ect...i'm not talking about check cashers and title loan places. next time your around a funiture store or medium sized electronics store, pop in and talk to the manager about who they use.

Actually, you could talk to the finance co.'s manager and i'm sure he'll be happy to put a few flyers on his counter. upside to this is, the finance company already has the customer on the books. If the customer ends up needing a new puter, all he would have to do is come get what he wants... just an extra thought. As a matter of fact, it wouldnt' hurt to JUST pass out your flyers to ALL local finance company's. any business you get off of those flyers will have backing when they walk in the door.

...goss

 

[Alan22]

Isn't the consumer also capable of doing that? Or do you consider yourself/us to be smarter than a consumer?

My comments were directed to the op and the nasty PM he sent me, not you Rick.