For retailers who have never offered retail finance then take a few minutes of your time to find out what it can do for your business, what it takes to get a facility in place and what the alternatives are if you can’t get a direct facility.
True retail finance involves the use of Debtor creditor Supplier agreements and requires the retailer to have a consumer credit licence with category C coverage on it. This will enable you to act as a broker and process consumer credit agreements through your various trading channels IE Web, Shop or mail order.
When looking for retail finance businesses are usually talking about Interest free credit (IFC) as used by many large furniture outlets. There is also the Buy Now Pay Later (BNPL) product largely used in lower margin sectors such as IT and consumer electronics shops. This product is not to be confused with IFC though as there is a significant difference between the two offers plus it’s also illegal for BNPL to be presented as IFC. Lastly there is interest bearing or classic credit, where the customer pays a rate of interest determined by the retailer.
There are other offers that could also be considered retail finance. Store cards as offered by large department stores for example and even some co-branded credit cards available through many large national retailers and online resellers. True retail finance though in my mind is fixed-term credit agreements that are specific to the purchase of goods and/or services from a specific retailer.
To offer retail finance a retailer usually needs to meet certain criteria to be accepted by a lender as an introducer. The criteria will vary from one lender to another but generally they are consistent in that they will all consider the products you sell, your retail sales turnover and your time in business. It may be that your business doesn’t meet some or all of the criteria and therefore leaves you without a retail finance offering.
This is an issue faced by many businesses throughout the UK and considering the recent history in the market where two previously key players withdrew from the sector out and another went into administration it may not change much in the near future.
The options then are to look to independent brokers to help your customers who need finance the most get assistance in sourcing a loan that can then be used to purchase from you. It is a process sometimes dressed up as retail finance but the truth is that it is simply an alternative to traditional retail finance for companies who can’t get a direct line into one of the 6 main lenders. It may also be treated as a supplement to traditional retail finance where we may offer to help customers declined by a lender but still needing credit in order to buy.
If you can a direct line arrangement in place with a lender then this frankly is the best process for you being that you will get paid directly by the lender and have control over the rates on offer. You won’t though be able to control the acceptance rates of the lender and in this sense having a back up offer may be very useful for business.
But what if you can’t get a direct facility? It is possible to advertise third-party facilities and enable customers who perhaps have been turned down for a bank loan or credit card.
If you have any questions regarding the Financial market then please get in touch via my website. I am happy to offer guidance on what’s available in the market based on personal experience and an honest appraisal of what options are best for your business.