How to obtain stocking funding

[NickGCS 14]

i can only presume this talk of £1500 profits is gross?

[trade vet 702]

27 minutes ago, EPV said:

I wouldn’t take a pitch anyway, in a million years. So i’m not opining on a pitch. I’m saying taking a debt on can help you grow.  It’s has done for me. It did for Rory and Nick. Maybe it hasn’t for some. But i’d wager that the debt wasn’t the problem there. 

OP, what’s your average days to turn? 

James,that doesn’t matter he is doing 6 cheapies per month.Matt does not appear to have an accountant yet.

By the way,I have had plenty of debt.In the early days I had an overdraft and then the bank manager ( remember them) warned that they could call it in at any time for any reason so advised I should have fixed period loans.These days the ‘banksters’ can pull fixed loans and stitch you up.I have never had a stocking loan because I have seen them lead traders with smaller businesses into all sorts of difficulties.There must be many who would like to close up or retire but can’t because of their accumulated debt so just keep on a brave face and carry on.

One of the good things about pitches is that when you get established with a good repeat customer base,it is a big help knowing they will give you several deals each week.

[EPV 631]

Ok, well look, I've said my bit. 

Good luck to you OP, to make a stock fund work you need to turn stock in less than 40 days, ideally. If you have the type of stock that sits around for 60 days but when it sells you pull big profits, then a stock fund won't be for you I don't think. If like me, your average days to turn figure is around 30 days, then it will work nicely for you.

[DPF 18]

6 cars a month is good doing part time. What sort of stock are you selling? 

[Tony911 79]

16 hours ago, MattFow said:

Hi my first post here, whilst I’ve been reading a lot of the threads I just haven’t found the time to comment as I’ve been running the trade business on the side of my normal 9-5, anywho I’m now full time as of January 1st and have a query.

 Over the last seven month ive been turning over around 6 cars a month from my drive (and the back of the pub up the road):-)  I’ve got a plot lined up ready to move into and want to triple that turnover of stock. However i can’t do that without some form of stocking loan. Most of what I have read up on is that stocking loans are obtained if you have been trading from business trading address for a minimum one year? 

Is this the case? Irdoes anyone know of anyone that can help newbies with profitable 1st year accounts?

Any advise would be great

Thanks in advance 

6 cars a month part time, whats margins on them? If you only making a couple of houndred per car you better off sticking to what you are doing and get more experience before diving in to the deep end, as having a pitch will have larger overheads. 

[MattFow 0]

Thanks for all the input. On my first post I didn't want to start chucking out there net margins. ETC. I should also point out that before I went into my current 9-5 I was selling for BMW/MINI for 8 years. So in no way i'm I new to any of this. Like you say the motor trade has a habit of getting under your skin and ultimately always pulls you back! The stock profile is basically sub 3k average Gross £650 PPU. This is all however internet based and is naturally price dependent there was also 1 £1300 loss in there. My feeling's are that by taking the plot, getting a consumer credit license, offering some warranty, a decent website, and having a generous amount of walk in traffic, we could push to obtain £1,000. 

 Maybe i'm miles off here but I didn't set up on my own to earn 50k a year, probably like some of yourselves you could walk back into a job in the motortrade and make that with your eyes closed. 

 

 

[Row 71]

2 hours ago, MattFow said:

probably like some of yourselves you could walk back into a job in the motortrade and make that with your eyes closed. 

I don't think many on here would be walking back into any job !

[Nick M.K. 574]

18 minutes ago, Row said:

I don't think many on here would be walking back into any job !

Can't speak for everyone but I am personally unemployable. I would probably pass an interview but a couple of weeks in they'd be showing me the door :-)

[Blenheim Car Sales 111]

£650 Gross ??       i only ever count money as profit thats Net after all costs and overheads have been deducted

[Nick M.K. 574]

11 hours ago, NickGCS said:

i can only presume this talk of £1500 profits is gross?

Hi Nick, why do you presume that?

2 hours ago, MattFow said:

I should also point out that before I went into my current 9-5 I was selling for BMW/MINI for 8 years. So in no way i'm I new to any of this.

This would be useful in the original post as a bit of background and the discussion could've gone in a different direction. 

[DPF 18]

Selling 6 bmw n Mini a month for 8 years 

[Nick M.K. 574]

4 minutes ago, DPF said:

Selling 6 bmw n Mini a month for 8 years 

I read it as selling 6 various cars now, working at a BMW / MINI dealership as a sales advisor for 8 years at some point before. That could mean 20-30 monthly sales so a fair bit of experience. 

[Max Branning 149]

The leverage debate could go on all day. If used correctly and with eyes wide open then yes it can enable you to grow quicker and make more money....BUT....most people overestimate their ability to handle debt, everyone who starts in business thinks they will make money, the majority do not. 

I would advise a new or newish say less than 2 years in the game avoid borrowing large sums and try and grow naturally if possible. 

Leverage is a double edged sword, when things are going good then its great...but when things are bad it becomes EXTRA bad....

This stocking loan bubble is bound to burst at some point...it reminds me a bit of the buy to let market early 00's when you could do same day remortgage etc to build a portfolio grow exponentially and have 50 houses in a few years......some of them people have done well but a lot are either bust or stuck in negative equity kept alive by low interest rates....

 

 

 

 

[Nick M.K. 574]

You are absolutely right Max but some people will not even know what Leverage means. Instead of trying to explain can I give another example from the property world: 

In 2007 me and a friend had about £30K each. I used my £30K to buy outright a new apartment in Sofia, Bulgaria (where I am from)

He used his £30K as a 10% deposit to get a mortgage on a £300K house in Sunbury On Thames, just outside London. 

The property market in Bulgaria moved quite rapidly and the value of my apartment doubled for 6-7 years. The value of his house increased a fair bit but not quite 100%...

In 2017 I sold that apartment for EUR 77K (around £72K). Made £42K gross. Great, everyone thought...

That same year he sold the 5 bed house in Sunbury (he never did much work to it) for £710000. Made nearly 9 times as much as me out of this one deal. 

Same investment (OK, he had a few years of mortgage payments but if rented out it would cover those), same risk (arguably mine was higher), same amount of work, same increase in asset value BUT multiple times better return. 

That's leverage. You get cheap money from a bank, let them work for you, let the bank make their 3-4%, you make your 300-400%.

Just one mistake above, my friend's house was £375K in 2007, not £300,000. 

[sparky 274]

13 hours ago, trade vet said:

James,that doesn’t matter he is doing 6 cheapies per month.Matt does not appear to have an accountant yet.

By the way,I have had plenty of debt.In the early days I had an overdraft and then the bank manager ( remember them) warned that they could call it in at any time for any reason so advised I should have fixed period loans.These days the ‘banksters’ can pull fixed loans and stitch you up.I have never had a stocking loan because I have seen them lead traders with smaller businesses into all sorts of difficulties.There must be many who would like to close up or retire but can’t because of their accumulated debt so just keep on a brave face and carry on.

One of the good things about pitches is that when you get established with a good repeat customer base,it is a big help knowing they will give you several deals each week.

Wise words as ever.

15 hours ago, EPV said:

I wouldn’t take a pitch anyway, in a million years. So i’m not opining on a pitch. I’m saying taking a debt on can help you grow.  It’s has done for me. It did for Rory and Nick. Maybe it hasn’t for some. But i’d wager that the debt wasn’t the problem there. 

OP, what’s your average days to turn? 

Absolutely, it can help you grow. On the other side of the fence, three dealers in my area over the last 12 months have more or less lost the shirt of their back because they tried to live the dream with stocking loans.

[EPV 631]

7 minutes ago, sparky said:

Wise words as ever.

Absolutely, it can help you grow. On the other side of the fence, three dealers in my area over the last 12 months have more or less lost the shirt of their back because they tried to live the dream with stocking loans.

I don’t dispute that. If you can’t sell cars quickly enough, the stocking fund isn’t for you. Hence why I asked OP what his days to turn is because believe me, it matters a lot when you have a fund. 

[NickGCS 14]

3 hours ago, Nick M.K. said:

Hi Nick, why do you presume that?

This would be useful in the original post as a bit of background and the discussion could've gone in a different direction. 

£1500 net regularly across cars retailing under £10k I find hard to believe. There’s always the odd few but on a regular basis? You would need to be buying them incredibly cheap, or selling them way over retail! I’m purely talking margin here, no comm/add ons etc

 

[Max Branning 149]

45 minutes ago, Nick M.K. said:

You are absolutely right Max but some people will not even know what Leverage means. Instead of trying to explain can I give another example from the property world: 

In 2007 me and a friend had about £30K each. I used my £30K to buy outright a new apartment in Sofia, Bulgaria (where I am from)

He used his £30K as a 10% deposit to get a mortgage on a £300K house in Sunbury On Thames, just outside London. 

The property market in Bulgaria moved quite rapidly and the value of my apartment doubled for 6-7 years. The value of his house increased a fair bit but not quite 100%...

In 2017 I sold that apartment for EUR 77K (around £72K). Made £42K gross. Great, everyone thought...

That same year he sold the 5 bed house in Sunbury (he never did much work to it) for £710000. Made nearly 9 times as much as me out of this one deal. 

Same investment (OK, he had a few years of mortgage payments but if rented out it would cover those), same risk (arguably mine was higher), same amount of work, same increase in asset value BUT multiple times better return. 

That's leverage. You get cheap money from a bank, let them work for you, let the bank make their 3-4%, you make your 300-400%.

Just one mistake above, my friend's house was £375K in 2007, not £300,000. 

I totally agree in terms of property investment leverage will always make you more money, but it has to be done sensibly. After the crisis lenders tightened up which meant people needed skin in the game to operate, around 25%, previously you could literally build a portfolio with no money down which was a disaster waiting to happen.

I see the stocking loans as similar as in you can acquire a high value stock with none of your own money invested, in the wrong hands this will head the same way, people overpaying, sitting on stock too long debts mount up and bang...

Dont get me wrong i still think if done sensibly it is a good way to build the business but i would advise newbies to be cautious from jumping in and trying to run before they can walk.

 

[Nick M.K. 574]

10 minutes ago, EPV said:

If you can’t sell cars quickly enough, the stocking fund isn’t for you

It's not even that, it's more about managing it properly with eyes very wide open AND some own cash reserves on the side just in case of a bad month. And by bad month I mean a couple of cars broken and in garages, a couple of cars rejected for full refunds, fewer enquiries than usual, bigger VAT bill than usual etc... 

You don't need to have sold the car by the end of the 90 days (in my case) stocking, you just need to be able to repay back the 70% of the purchase capital that becomes due.

2 minutes ago, NickGCS said:

£1500 net regularly across cars retailing under £10k I find hard to believe

Why? 

If someone bought a £8K car at auction at £300 over CAP Clean (happens EVERY day) and I bought privately at CAP Below the difference alone is over £1500 (no auction fees also). 

Then if someone else is selling the same car for £9800 and I CAN sell at £10500 that is another 50% on top of that £1500.

Then if I take 6.5% finance commission on the £10500 car that is another £680 (less really because they will have a deposit).

Please note that I haven't even added the deal margin to the math or any warranty profit. 

All of the above can and does happen regularly, especially when the privately bought car comes in p/x.

[EPV 631]

20 minutes ago, Nick M.K. said:

It's not even that, it's more about managing it properly with eyes very wide open AND some own cash reserves on the side just in case of a bad month. And by bad month I mean a couple of cars broken and in garages, a couple of cars rejected for full refunds, fewer enquiries than usual, bigger VAT bill than usual etc... 

You don't need to have sold the car by the end of the 90 days (in my case) stocking, you just need to be able to repay back the 70% of the purchase capital that becomes due.

Well yes, if you have cash reserves or your own cash invested in stock that you can use to settle a funded car when sold that’s all good. 

I was more highlighting a situation where you needed the sale of the car to pay off the underlying loan. Which if you can’t do within the time set by the load can lead you into difficulties. Even past 60 days you have to start paying some of the capital back. Which is why I think if you can’t sell cars within 45 days repeatedly and don’t have the ability to settle it otherwise, I can see how people could get into difficulty, fast. 

My current split of funded vs personally funded is 70/30 which is too high but I needed some cash out of my business to pay the costs associated with moving into my unit and setting it up. It wasn’t cheap. 

Gradually though I will return to a 60/40 split and then eventually become self funded 80/20 with the fund being available for me to move quickly and stock up on days when the auctions are quiet for whatever reason. 

Anyway, the OP seems clued up and as long as he isn’t going to buy his entire forecourt on a fund and as long as he doesn’t buy cars that become ornaments before he gets his money and profit out, then a fund could be for him. 

I called you and Rory before I took mine on and you both thought it would be the right move for me and it has been so far. 

People should make their own minds up. 

[NickGCS 14]

32 minutes ago, Nick M.K. said:

 

Why? 

If someone bought a £8K car at auction at £300 over CAP Clean (happens EVERY day) and I bought privately at CAP Below the difference alone is over £1500 (no auction fees also). 

Then if someone else is selling the same car for £9800 and I CAN sell at £10500 that is another 50% on top of that £1500.

Then if I take 6.5% finance commission on the £10500 car that is another £680 (less really because they will have a deposit).

Please note that I haven't even added the deal margin to the math or any warranty profit. 

All of the above can and does happen regularly, especially when the privately bought car comes in p/x.

As I mentioned I am talking purely about margin - not commission or extras.

If you can buy private at £1200 under cap clean then fair play, a braver man than me. The thought of running around the country and turning up and buying an £8k cash car off billy in his trackies gives me the fear.

OP was asking for advice on a stocking loan and moving from a doorstepper to a pitch, in my opinion it’s an unfair reflection to mention £1500 as net when I would consider that gross if your running a pitch- you won’t have time to run around the country looking at private cars unless you employ someone to watch the pitch which will of course eat into your margin, your overheads will obviously be more, again eating into your margins, etc etc

[EPV 631]

32 minutes ago, NickGCS said:

£1500 net regularly across cars retailing under £10k I find hard to believe. There’s always the odd few but on a regular basis? You would need to be buying them incredibly cheap, or selling them way over retail! I’m purely talking margin here, no comm/add ons etc

 

This is the problem with conversations like these. Naturally most of us want to keep our affairs to ourselves. Especially on a public forum. When someone tells you something you find hard to believe or someone says you shouldn’t listen to the bullshit other traders spout off then I assume the reason why they find it hard to believe is they can’t do said thing for themselves. That doesn’t mean it can’t be done and isn’t being done. It just means they can’t. 

It’s worthless talking about this because even if I was, or Nik were happy to disclose on a public forum our margins, people who have made up their minds that it doesn’t happen, or can’t be done, wouldn’t believe it anyway. 

If you’re happy with what you’re pulling from cars then that’s all that matters. But if you’re not happy, or if you’re the type to be jealous of others (not saying you are mate just making a point) then instead of calling other people bullshitters or not believing them, you shouldn’t tell others it can’t be done. 

“Those that can’t do it should not get in the way of those doing it”

[Nick M.K. 574]

6 minutes ago, NickGCS said:

If you can buy private at £1200 under cap clean then fair play, a braver man than me. The thought of running around the country and turning up and buying an £8k cash car off billy in his trackies gives me the fear.

Please re-read the last three words of my post. 

I don't travel to buy privately. People either travel to me to sell or more often the car simply comes in part exchange. Buying this way is far less braver than the auctions. 

7 minutes ago, EPV said:

It’s worthless talking about this because even if I was, or Nik were happy to disclose on a public forum our margins, people who have made up their minds that it doesn’t happen, or can’t be done, wouldn’t believe it anyway.

I will retell one of my all time favourite jokes here: 

After a storm and big waves a lot of small fish is dumped on a beach, jumping helplessly. A man sees another man who walks right by the water's edge, picks up one small fish, one of thousands, and throws it back in the water. He says to him: "There so many many of them, you can't throw them all back in, it makes no difference what you are doing." 

"Well, it made a huge difference to that one"

[trade vet 702]

Ok,so Matt has worked in a centrally heated franchise dealership for 8 years.He has probably been impressed by the traders who called in.If that is the case,he needs to run a check on these guys.The bottom line is Matt is still a ‘non league player’ and is likely to have difficulties running a pitch.I note that he says he does not want to make the jump to earn £50k per year.I would say earning £50k In year 1 and have the business break even is a good result for a start up.

Matt would you mind providing some basic info about your proposed new pitch without telling us where it is.

1) Is it an established business and what does it sell now or if not what did it sell previously.

2) Describe the size and how many it will hold under cover and in the open

3) The cost of rent and business rates and are you taking on a lease.

4) Does it have passing trade.

With this info,we may be able to explain running costs you may not have thought of,which may be helpfull.

 

[trade vet 702]

29 minutes ago, EPV said:

This is the problem with conversations like these. Naturally most of us want to keep our affairs to ourselves. Especially on a public forum. When someone tells you something you find hard to believe or someone says you shouldn’t listen to the bullshit other traders spout off then I assume the reason why they find it hard to believe is they can’t do said thing for themselves. That doesn’t mean it can’t be done and isn’t being done. It just means they can’t. 

It’s worthless talking about this because even if I was, or Nik were happy to disclose on a public forum our margins, people who have made up their minds that it doesn’t happen, or can’t be done, wouldn’t believe it anyway. 

If you’re happy with what you’re pulling from cars then that’s all that matters. But if you’re not happy, or if you’re the type to be jealous of others (not saying you are mate just making a point) then instead of calling other people bullshitters or not believing them, you shouldn’t tell others it can’t be done. 

“Those that can’t do it should not get in the way of those doing it”

Most of us who have been in this job a long time can recall a lot of guys who talked a big game,looked the part etc and then suddenly self destructed often leaving a trail of havoc.That is why I never believe big profit talk unless I have seen actual financial results which are often availible in the public domain.Unfotunately this job attracts a lot of bullshitters.