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twerp

Stocking Loan Availability in recent years?

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Hello, just wondering about how available were stocking loans made to relatively new traders in the past few years.

I heard about traders getting 500k at 2% which would explain a lot.

What would have been the conditions or requirements ?

Cheers

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I applied this week but because I have only been trading 8 months they couldn’t look at the application even with management accounts and VAT registration.

I think they would need a decent bit of trading history so depends on how new is new.

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Cazoo are new and they had £33m in year 1.Which was £9m @ 3.75 over base and 1.75 over for the rest which cost them £460k.They probably get preferential terms.Never had a stock loan but I think they are repayable on demand ( that means any time ,any reason and they can please themselves like an overdraft )secured against the stock with your personal guarantee.It may not be such a big risk for Cazoo but I think smaller guys could potentially lose their house if the lender decides to pull the plug.However I have no idea whether dealers have a better alternative.

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I have looked at the likes of nextgear etc and by the time you look at all the fees etc it equated to something like the equivalent 10-12 flat which is quite a chunk, unless you have a decent cash buffer as well i can see how you can come a cropper if you are late/miss the repayment schedules overdrafts tend to be able to be pulled on a whim if the lender chooses and be prepared to justify your existence to them yearly if your running at your limit mostly.

If i had to choose between the two i would go down the overdraft route as long as it's on decent terms but be prepared to sign personal guarantees. 

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I wouldn’t know but not that long ago we had someone on this forum informing us his stocking loan cost something paltry like a few quid a car. I suspected I could smell b/s at the time.

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39 minutes ago, BHM said:

I wouldn’t know but not that long ago we had someone on this forum informing us his stocking loan cost something paltry like a few quid a car. I suspected I could smell b/s at the time.

They cant add up can they . Next Gear charge so many different fees it confuses people , Seen it mess with peoples heads quite bad 

Also with stocking funds at low rates from Finance houses , come reciprocal business using their Finance to a level that's quite high , if not reached its a big jump on interest. 

Only one way i think Start low , Start slow , Reinvest and grow slowly to start and then it speeds up as you go , Benefit it ITS ALL YOURS , some big companies are up the creek without a paddle if they sold up as they would have nothing left after pay back . 

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3 hours ago, David Horgan said:

They cant add up can they . Next Gear charge so many different fees it confuses people , Seen it mess with peoples heads quite bad 

Also with stocking funds at low rates from Finance houses , come reciprocal business using their Finance to a level that's quite high , if not reached its a big jump on interest. 

Only one way i think Start low , Start slow , Reinvest and grow slowly to start and then it speeds up as you go , Benefit it ITS ALL YOURS , some big companies are up the creek without a paddle if they sold up as they would have nothing left after pay back . 

Agree, this is what I’m doing, have the luxury of doing it whilst still holding down another full time job, so it’s maybe not possible for everyone to do it this way. Started 2 years ago with £10k and 2 cars, business now worth something like £90k with 8 cars. Not saying this is a good performance, feels pretty slow actually, but I own it all and owe nothing to nobody. As you say David, it’s gathering pace now as the more cars you have the more you sell. 

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Never had a stocking loan but are BCA still throwing money at dealers like no tomorrow? 

Edited by Frank Cannon
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11 hours ago, JDM1983 said:

Agree, this is what I’m doing, have the luxury of doing it whilst still holding down another full time job, so it’s maybe not possible for everyone to do it this way. Started 2 years ago with £10k and 2 cars, business now worth something like £90k with 8 cars. Not saying this is a good performance, feels pretty slow actually, but I own it all and owe nothing to nobody. As you say David, it’s gathering pace now as the more cars you have the more you sell. 

You are very fortunate.Stick to what you are doing,don’t change your stock,keep your day job etc .Sounds ideal.

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Thankyou all, was really just wondering if anyone could confirm such a low rate. 

Seems mad to me

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On 2/13/2021 at 9:29 PM, JDM1983 said:

Agree, this is what I’m doing, have the luxury of doing it whilst still holding down another full time job, so it’s maybe not possible for everyone to do it this way. Started 2 years ago with £10k and 2 cars, business now worth something like £90k with 8 cars. Not saying this is a good performance, feels pretty slow actually, but I own it all and owe nothing to nobody. As you say David, it’s gathering pace now as the more cars you have the more you sell. 

This was my quandary.  I took 40k out of my house extension equity and have managed to pay back 6.  We will need the money back later in the year, looking at the rates and some of the downsides I may as well try and take a loan for 25k and not get involved with unit stocking. At lease at the second the cars are mine and I am in control 

On 2/13/2021 at 4:29 PM, trade vet said:

Cazoo are new and they had £33m in year 1.Which was £9m @ 3.75 over base and 1.75 over for the rest which cost them £460k.They probably get preferential terms.Never had a stock loan but I think they are repayable on demand ( that means any time ,any reason and they can please themselves like an overdraft )secured against the stock with your personal guarantee.It may not be such a big risk for Cazoo but I think smaller guys could potentially lose their house if the lender decides to pull the plug.However I have no idea whether dealers have a better alternative.

This is what makes me laugh about big companies/old boys network.  I have been in the trade 20 years. I was a pretty decent salesman and a solid used car manager. If I tried to borrow 60k for my business and told them I expected to make an epic loss of 100k in the 1st two years I would get laughed at. Yet a bloke from love film that thinks he has re invented the wheel manages to get millions. I mean fair play to the guy but come on. 

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11 hours ago, DCS01 said:

This was my quandary.  I took 40k out of my house extension equity and have managed to pay back 6.  We will need the money back later in the year, looking at the rates and some of the downsides I may as well try and take a loan for 25k and not get involved with unit stocking. At lease at the second the cars are mine and I am in control 

This is what makes me laugh about big companies/old boys network.  I have been in the trade 20 years. I was a pretty decent salesman and a solid used car manager. If I tried to borrow 60k for my business and told them I expected to make an epic loss of 100k in the 1st two years I would get laughed at. Yet a bloke from love film that thinks he has re invented the wheel manages to get millions. I mean fair play to the guy but come on. 

Their funding is now up to £500m ? The big Venture Capital guys are queuing up to invest.I find it extraordinarily,last week they bought a big group of prep and storage centre sites that employ 500.In year 1 they employed 49 people lost £18.5m and the wage bill was £6m.Where is it all going to end.I think if they used Prince Charles,Ant and Dec,Greta Thunburg,Sir David Attenburgh and The Archbishop of Canterbury to advertise,it would not help them.....but what do I know ?

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On 2/13/2021 at 9:29 PM, JDM1983 said:

Agree, this is what I’m doing, have the luxury of doing it whilst still holding down another full time job, so it’s maybe not possible for everyone to do it this way. Started 2 years ago with £10k and 2 cars, business now worth something like £90k with 8 cars. Not saying this is a good performance, feels pretty slow actually, but I own it all and owe nothing to nobody. As you say David, it’s gathering pace now as the more cars you have the more you sell. 

It will all of a sudden start to rise in your bank , you wont see it coming but one month it will double as you get more shots at selling more car . Keep going the way you are .

I built my daughters business  the same way , shown her the slow profitable way , now worth a small fortune in Stock , Money in bank and property , all hers too . 

My sons been doing this trade a good few years longer and hes the same . 

Solid growth . Funded by yourself is the way .

Son had a friend do the Stock funding method , 10 years and owns hardly anything , just works to pay the bills , Now decided to start again with a few cars , less stress , and earn some money , 

 

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On 2/14/2021 at 7:27 AM, Frank Cannon said:

Never had a stocking loan but are BCA still throwing money at dealers like no tomorrow? 

From what I see the stocking loan boys and BCA have a nice business model.

Lend people money to buy an asset which they sell in your behalf to a) create a demand for consumer finance b) create a demand for auction cars

The problem comes when the economy takes a down turn and the finance houses want their money back, not stuck in depreciating cars anchored to forecourts. 
 

As people I know found out in the 2008 recession, owe the bank a little and you’ve got a problem, owe them a lot and the bank has a problem. I guess most dealers fit in the former.

Cazoo sits in the latter but that’s a different model, everyone piles in (money is cheap and many private individuals, pension Co’s et. are also now giving the PE boys money as they search for yield) they build it, then float it and every investor gets his money back with a nice premium, leaving those who bought shares in the floated PLC to take the hit when it becomes apparent that profits won’t match forecasts.

 
Slow and steady with your own cash means you can sleep at night.

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11 hours ago, CCC said:

From what I see the stocking loan boys and BCA have a nice business model.

Lend people money to buy an asset which they sell in your behalf to a) create a demand for consumer finance b) create a demand for auction cars

The problem comes when the economy takes a down turn and the finance houses want their money back, not stuck in depreciating cars anchored to forecourts. 
 

As people I know found out in the 2008 recession, owe the bank a little and you’ve got a problem, owe them a lot and the bank has a problem. I guess most dealers fit in the former.

Cazoo sits in the latter but that’s a different model, everyone piles in (money is cheap and many private individuals, pension Co’s et. are also now giving the PE boys money as they search for yield) they build it, then float it and every investor gets his money back with a nice premium, leaving those who bought shares in the floated PLC to take the hit when it becomes apparent that profits won’t match forecasts.

 
Slow and steady with your own cash means you can sleep at night.

There is also the added bonus for BCA that if funders send the transporter in and collect their cars back from a dealer, BCA get to sell the cars all over again to someone else, most likely on stocking finance again. It’s a win win for them.

There is so much cheap money about and so few places to make a good yield that investors are fighting over these start up companies and as you say once floated the real value of the company will become apparent, you just have to look at  a floatation like Aston Martin to see how thing’s can go very wrong.

Organic growth for me too, take your time and build up a nice stock/pot of money that you have complete control over. 

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40 minutes ago, Bmx Bandits said:

There is also the added bonus for BCA that if funders send the transporter in and collect their cars back from a dealer, BCA get to sell the cars all over again to someone else, most likely on stocking finance again. It’s a win win for them.

There is so much cheap money about and so few places to make a good yield that investors are fighting over these start up companies and as you say once floated the real value of the company will become apparent, you just have to look at  a floatation like Aston Martin to see how thing’s can go very wrong.

Organic growth for me too, take your time and build up a nice stock/pot of money that you have complete control over. 

B)

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On 2/13/2021 at 1:38 PM, twerp said:

Hello, just wondering about how available were stocking loans made to relatively new traders in the past few years.

I heard about traders getting 500k at 2% which would explain a lot.

What would have been the conditions or requirements ?

Cheers

Rumors, don't listen to them.

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23 hours ago, Earunder said:

Rumors, don't listen to them.

Two Finance companies will indeed provide stock funding at 2% , BUT they want reciprocal finance business to an horrendous level . This is why some car supermarkets insist cars are sold on finance to customers , If the trader falls short of selling finance then the 2% becomes nearer 8% and higher , Pure con selling . 

  

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20 hours ago, David Horgan said:

Two Finance companies will indeed provide stock funding at 2% , BUT they want reciprocal finance business to an horrendous level . This is why some car supermarkets insist cars are sold on finance to customers , If the trader falls short of selling finance then the 2% becomes nearer 8% and higher , Pure con selling . 

  

B)

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On 2/18/2021 at 9:59 AM, David Horgan said:

Two Finance companies will indeed provide stock funding at 2% , BUT they want reciprocal finance business to an horrendous level . This is why some car supermarkets insist cars are sold on finance to customers , If the trader falls short of selling finance then the 2% becomes nearer 8% and higher , Pure con selling . 

  

Yup.  Got offered as low as:

7:1 @ 0.5% (Edit: Above BOEBR)

Edited by Earunder

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On 2/18/2021 at 9:59 AM, David Horgan said:

Two Finance companies will indeed provide stock funding at 2% , BUT they want reciprocal finance business to an horrendous level . This is why some car supermarkets insist cars are sold on finance to customers , If the trader falls short of selling finance then the 2% becomes nearer 8% and higher , Pure con selling . 

  

That’s the business model. Dealer just a middle man (who does the hard work) between finance company and asset in reality? 

my belief was that if you owe money to someone you’re working for them, not yourself.

Though right now the economy is built on high levels of debt so the governments are now having to do a lot of intervention to keep the house of cards up.

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