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If you own your own business and are looking for financing for your consumer notes (consumer contract financing, retail installment contract financing, consumer receivables financing, etc.) you may find it helpful, relevant to the funding process, to know before-hand the types of questions you will be asked.
You may be asked if you are profitable. If you have not been profitable you should be prepared to provide a good answer as to why you are not yet profitable. For example, perhaps you are a "start-up"and just completing the first year of your business. Although you may have not been profitable in the first year of business, you should be able to point to specific factors that you anticipate will lead to profitability the next year. On the other hand, if you have been profitable, you may be asked what your profit margin is. The reason that you would be asked this question is that the consultant or funding source, in asking the question is trying to get a feel as to what your toleration level would be relevant to the discounts and reserves. Someone seeking consumer contract financing, retail installment contract financing, consumer receivables financing, etc. will have to have very strong profit margins to be a good candidate for funding. |
You may also be asked what the length of time is before your product or service is fully delivered to your customer. Some prospective clients seeking retail installment contract financing have the mistaken idea that they can be funded at the point in time when the customer signs off on their contract. The reality is that the funding source will need to verify that the product has been delivered to the customer's satisfaction or that the service has been performed to the customer's satisfaction before funding is provided.
You will also be asked what the consumer contract amount is. The higher the amount is, the greater the perceived risk is associated with the consumer contract(s). One funding source may not want to fund any consumer contracts over $5,000. Another funding source may be willing to fund consumer contracts over $5,000; but, may not feel comfortable funding consumer contracts over $8,500. While at the same time another funding source may be willing to fund consumer contracts up to $15,000. Consumer receivable financing usually tops out at about $15,000 per contract. The only exception to this is a situation in which a funding source has been funding $15,000 contracts on a regular basis for a given client, after the funding source has gotten comfortable with the transaction it may be possible for them to consider funding future contracts up to an amount of $25,000 per contract. I have never heard of consumer receivable financing transactions which exceeded $25,000 per contract on a regular basis
If you are a prospective client seeking consumer contract financing you will probably be asked if you require a down payment from your customers. For at least one funding source, down payments from customers can translate into lower discounts charged to you the client. Also from a funding standpoint, a down payment charged to the customer translates into a transaction with slightly less risk attached to it for the simple reason that the customer has a little more something to loose from the outset if they discontinue their monthly payments.
These are just four more questions which you as a business owner can anticipate receiving when you are looking for financing for your retail installment contracts.
For more info, contact us here.
You will also be asked what the consumer contract amount is. The higher the amount is, the greater the perceived risk is associated with the consumer contract(s). One funding source may not want to fund any consumer contracts over $5,000. Another funding source may be willing to fund consumer contracts over $5,000; but, may not feel comfortable funding consumer contracts over $8,500. While at the same time another funding source may be willing to fund consumer contracts up to $15,000. Consumer receivable financing usually tops out at about $15,000 per contract. The only exception to this is a situation in which a funding source has been funding $15,000 contracts on a regular basis for a given client, after the funding source has gotten comfortable with the transaction it may be possible for them to consider funding future contracts up to an amount of $25,000 per contract. I have never heard of consumer receivable financing transactions which exceeded $25,000 per contract on a regular basis
If you are a prospective client seeking consumer contract financing you will probably be asked if you require a down payment from your customers. For at least one funding source, down payments from customers can translate into lower discounts charged to you the client. Also from a funding standpoint, a down payment charged to the customer translates into a transaction with slightly less risk attached to it for the simple reason that the customer has a little more something to loose from the outset if they discontinue their monthly payments.
These are just four more questions which you as a business owner can anticipate receiving when you are looking for financing for your retail installment contracts.
For more info, contact us here.
Read about Consumer Contracts Financing Process Part 1
Consumer Contracts Financing Process Part 2
Consumer Contracts Financing Process Part 3
Consumer Contracts Financing Process Part 4
Consumer Contracts Financing Process Part 5
Consumer Contracts Financing Process Part 2
Consumer Contracts Financing Process Part 3
Consumer Contracts Financing Process Part 4
Consumer Contracts Financing Process Part 5
