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Consumer Contract Financing Process
If you are a prospective client looking for retail installment contract financing (consumer contract financing, consumer receivables financing or financing consumer notes), you should anticipate a variety of initial questions.
One question you are sure to hear will be relevant to whether you are providing a delivered product or whether you are providing a future service of some type. As it relates to consumer contract financing (consumer receivables financing, etc.) a delivered product will be perceived as less risky than a future service. A company that provides a delivered product but also has a future service component attached to the servicing of the product will generally be considered a future service from a financing standpoint since the risk still exists in terms of the future service. Future service transactions are still very doable, they are just perceived as higher risk and the due diligence is done accordingly.
If you are looking for consumer receivables financing (financing consumer notes etc.) you should also be ready to describe in detail the product or service you are providing. The product or service provided to the consumer will be scrutinized in terms of its actual value. Is it a new product or service? What experience do you have in terms of providing this product or service? Is it a product or service that truly meets the needs of the consumer and what is your track record of delivering the product or service?
When seeking financing for your consumer notes (retail installment contract financing) you will almost certainly be asked how long you have been in business. If you have been in business for less than two years, for financing purposes you should know that you will be considered a "start-up" company. The possible exception to this would be if you have owned a company for over two years and have a proven track record of success in that company and now are simply enlarging your business in a specialized area and doing so under a new name for marketing purposes etc.
It has been said that business is marketing, so if you are seeking retail installment contract financing (consumer contract financing) you should be ready to provide some detail relevant to your marketing plan. Will you be doing infomercials? Will you be advertising on radio and T.V.? Do you have a fully functional web-site that is equipped to process on-line orders? Do you have a spokesperson? Will you be engaged in any cross marketing, and if so how?
Also if you are a prospective client looking for consumer contract financing (consumer receivable financing) you will most likely be asked a question relevant to your profit margin. The reason for this question is to determine if you possess the necessary toleration level in terms of the discount (the fee you pay for the financing service) and reserve (a hold-back used to mitigate against the possibility of loss, which is refunded at some time during the life of the contract, assuming that the contract is paying out in a timely fashion) . If you are looking for consumer receivable financing in the sub-prime market you can be sure that the discount and reserve will reflect whatever risk is involved.
These are some of the "screening" questions you can expect to be asked in the initial phase of the funding process. There are also other related questions you can expect that will be covered in future articles to follow.