Business / Stocking Loans Question

[twerp 69]

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

 

 

[trade vet 697]

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 !

[twerp 69]

You're correct regards BCA stocking loan

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

[Mark101 536]

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.  

[Nick M.K. 574]

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. 

[twerp 69]

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 !

[JDM1983 28]

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?

[Mark101 536]

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 June 10, 2019 by Mark101

[Nick M.K. 574]

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. 

[JDM1983 28]

Thanks Nick, useful to know!

[RH Trading 80]

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

[Mark101 536]

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

[RhinoHorn 7]

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. 

[Nick M.K. 574]

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 June 10, 2019 by Nick M.K.

[CCC 31]

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.

[Louise 0]

Does anyone know of a stocking loan that will work with you with no accounts. My husband has been in the car trade for 20+years and is finally considering going it alone but nowhere will give him a stocking loan as he doesn't have a year of accounts to prove sales, without the loan he can't start the business hence the catch22.

 

Sorry I know this is an old post but I just thought I would ask the question! 

 

 

[trade vet 697]

6 hours ago, Louise said:

Does anyone know of a stocking loan that will work with you with no accounts. My husband has been in the car trade for 20+years and is finally considering going it alone but nowhere will give him a stocking loan as he doesn't have a year of accounts to prove sales, without the loan he can't start the business hence the catch22.

 

Sorry I know this is an old post but I just thought I would ask the question! 

 

 

There is a big difference from working as an employee to running your own car sales business.Things will happen in year one he has never thought of.So I would forget about going into debt until you have been operating and coping for 18 months.

[Mojo121 229]

15 hours ago, Louise said:

Does anyone know of a stocking loan that will work with you with no accounts. My husband has been in the car trade for 20+years and is finally considering going it alone but nowhere will give him a stocking loan as he doesn't have a year of accounts to prove sales, without the loan he can't start the business hence the catch22.

 

Sorry I know this is an old post but I just thought I would ask the question! 

 

 

Do you have collateral to secure the loan with? I.e property

[Kongah 0]

I've recently been recommended to read some information on https://www.aaappp.org.uk/ Has anyone used it? I think it's gonna be useful.

[David Horgan 564]

On 2/10/2020 at 3:16 PM, Louise said:

Does anyone know of a stocking loan that will work with you with no accounts. My husband has been in the car trade for 20+years and is finally considering going it alone but nowhere will give him a stocking loan as he doesn't have a year of accounts to prove sales, without the loan he can't start the business hence the catch22.

 

Sorry I know this is an old post but I just thought I would ask the question! 

 

 

Don't borrow money for start up new business as its the path to losing the lot . 

Start with one or two cars that you can afford to buy , make a profit and return the investment , takes longer but its more secure , teaches you the job , makes you think PROFIT . this way you become a money EARNER unlike some /most who borrow who become  money TURNERS to repay the banks , cards , stocking loans , etc , soon find yourself working for the lender and not YOU . 

[Grantlfc81 88]

Blue motor finance are starting their own stocking loans soon. Within the next few months I believe.

[Casper 272]

5 hours ago, David Horgan said:

Don't borrow money for start up new business as its the path to losing the lot . 

Start with one or two cars that you can afford to buy , make a profit and return the investment , takes longer but its more secure , teaches you the job , makes you think PROFIT . this way you become a money EARNER unlike some /most who borrow who become  money TURNERS to repay the banks , cards , stocking loans , etc , soon find yourself working for the lender and not YOU . 

Well said David

[sparky 274]

15 hours ago, David Horgan said:

Don't borrow money for start up new business as its the path to losing the lot . 

Start with one or two cars that you can afford to buy , make a profit and return the investment , takes longer but its more secure , teaches you the job , makes you think PROFIT . this way you become a money EARNER unlike some /most who borrow who become  money TURNERS to repay the banks , cards , stocking loans , etc , soon find yourself working for the lender and not YOU . 

Wise words I know. Yes I know some do well on SL, but there are many SL bitches out there along with a good few who have lost the shirt off their back. At current prices I'm guessing there are a good few of them now experiencing squeaky bum time, never mind.

[Rory RSC 596]

Get some momentum going, once you are doing well then borrow a bit of money on some 0% cards / loan etc and stick to the same thing. If you do get stocking don't suddenly go from having a pitch of 20 cars at 4-8k and go out and buy 3 20k vanity projects. Do what you are good at.

Debt, borrowing etc are wonderful tools to accelerate and grow your business at the right time. They will ruin you at the wrong time.   High stakes at the end of the day when your house in on the line.

[sparky 274]

There was a lovely quote on here from someone many years ago. "When it's sunny my lender wants to lend me an umbrella, when it's raining he wants to take it away".