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twerp

Business / Stocking Loans Question

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Not interested in one myself, but I am fascinated by these new starters who started out with 8x bangers 3 years ago and now have 100x cars and £700k - £1m in loans

Who loans them such sums and what are the conditions, rates and deposits ?

 

Ta

 

 

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I have had plenty of loans,overdrafts but never a stocking loan.All I know is when the job goes backwards,it appears to be the stocking loans that cause the damage to the guys who go tits up.Just lately a seemingly ‘doing well dealer’ near us who came from nothing a few years ago had his stock lifted by the lender.Rumours were that he got into a mess by putting cars on his stocking loan which weren’t his.Also,I don’t know if it is true but someone told me that BCA stocking costs 9% plus added charges !

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You're correct regards BCA stocking loan

I'm just puzzled what banks lend these lads huge sums based on very limited experience

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I actually think that their risk is minimal (as a funder).

Each loan is secured against an asset at trade value or less

Each dealer signs a PG securing that loan against any personal assets

Compare that to an unsecured personal loan and which is the more secure?

That said, from the recipients standpoint, I can see how that can quickly escalate into a problem if cars do not sell within the allowed terms.  

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15 hours ago, twerp said:

Who loans them such sums and what are the conditions, rates and deposits ?

I can't answer for those exact operators but I'll give you my answer: 

The finance company Close funds my stock, they pay 70% of purchase invoice value at an annual interest of 2.5% which works out at £21 in interest every month in stock on a £10K car. They also charge a flat "bonnet" fee of £20. My limit is 90 days so if I sell that car in 45 days the funding for it will cost me around £51.50. 

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6 minutes ago, Nick M.K. said:

I can't answer for those exact operators but I'll give you my answer: 

The finance company Close funds my stock, they pay 70% of purchase invoice value at an annual interest of 2.5% which works out at £21 in interest every month in stock on a £10K car. They also charge a flat "bonnet" fee of £20. My limit is 90 days so if I sell that car in 45 days the funding for it will cost me around £51.50. 

I didn't realise it was that cheap !

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8 minutes ago, Nick M.K. said:

I can't answer for those exact operators but I'll give you my answer: 

The finance company Close funds my stock, they pay 70% of purchase invoice value at an annual interest of 2.5% which works out at £21 in interest every month in stock on a £10K car. They also charge a flat "bonnet" fee of £20. My limit is 90 days so if I sell that car in 45 days the funding for it will cost me around £51.50. 

What happens after 90 days Nick? Is there a criteria that Close have before you would be considered for such a facility?

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Posted (edited)
7 minutes ago, twerp said:

I didn't realise it was that cheap !

They make their money on reciprocal business.  You have to place a few cars on finance with them to achieve a stock fund.

Next Gear are far more expensive but they will fund 100% including fees, delivery etc and there is no reciprical requirement.

You get 120 days before they take the full balance but be wary of their % of cost payment tranches at 45, 60, 90 days etc.

Edited by Mark101

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9 minutes ago, JDM1983 said:

What happens after 90 days Nick? Is there a criteria that Close have before you would be considered for such a facility?

You just return the 70% that they funded. Press a button on a computer screen, they recover the funds from your account. 

The criteria as Mark pointed out is to do a few deals on finance and give them reciprocal retail finance business, my facility is only £50K and every year I need to give them 3-4 times as much in finance business. They still pay me their commission on the finance so every year I make a lot more from them than they make from me :-)

16 minutes ago, twerp said:

I didn't realise it was that cheap !

Not everyone will get those terms but if a very small independent like me can most pitches will eventually. 

Larger pitches actually get their funding free of charge. 

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I think like any kind of loan, you've got to manage it and not let it get out of hand, I had a small stocking loan until a few years ago, positive was it keeps you sharp and focused on return and making sure you sell within an allotted time as said above. Negatives, like a credit card the offers to increase my funding kept coming virtually every week and its tempting to build your business around this debt. But if you use them wisely, your confident you can get a good finance pen and do sufficient volume its somebody else's money you're playing with so nothing against them, just grow within your means. Seen dealers go from 10 cars to 50 in a year and all they do is work for the funding company and stressed out their head

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Taking debt to fund growth is smart.  Taking debt to fund lifestyle or feed an ego is dangerous.

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2 hours ago, JDM1983 said:

What happens after 90 days Nick? Is there a criteria that Close have before you would be considered for such a facility?

You can ask to extend for another 30 days but there is a fee to pay. Can't remember how much it is off the top of my head. 

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Posted (edited)

I don’t know the answer to that. If unsold by day 90 I just return the money from my own pot or overdraft. 

Edited by Nick M.K.
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Cloe Brothers is a neat arrangement. Low risk in that it's 70% of invoice and and basically they are funding you to help sell their finance. A win-win if managed correctly and the market's doing OK. At those terms funding from bank or your own pocket seems to be not worthwhile.

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