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Getting Funds for Your Captive Finance Company

Posted On: March 5, 2018 author Paul Kendall

 We’ve all seen it before. Maybe we’re the ones that have been in it before. A company is selling a product, but doesn’t offer an easy and accessible solution to provide financing for their product. Everywhere you go, you’ll find it, if you look closely enough.

Unfortunately for some businesses, this leaves customers out in the cold and results in a business losing a sale. Do you know of a business that has a model like this? Having to turn away customers because they lack the funding to purchase their product or service?

 

It’s especially common for businesses with high-ticket items: furniture, vehicles, automobile parts, and more. I’m sure you can point at a business that has something expensive to sell. This is where a captive finance company comes into play.

If they don’t have one setup, they’re probably missing out on potential sales.

When a customer comes in and wants to buy a major product of theirs, chances are they won’t have the cash up front. (Who carries around that much cash anyway?) Whatever the reason, if someone can’t pay upfront or can’t get a loan to purchase their goods, they normally would have to walk back out the door.

But with a captive finance company, they can instead set up a specially payment plan to allow them to walk out the door with their product. Which, of course, also involves getting them setup with a payment plan so that they still get paid.

Think of it like a mini-bank for customers.

As a captive finance company, you are like their “mini-bank,” providing personalized financing solutions.


How to Find Funds for Forming a Captive Finance Company

 

If you’re just starting out as a fledgling captive finance company, it might seem difficult at first but it doesn’t need to be. You might face similar challenges that any other startup company might, but it’s completely doable.

 

When starting out, a financier is going to look at a few distinct things about your business—your credit score, time in business, frequency of customer purchases, business stability, etc.

 

Time in Business

If you’ve been in business for a while, you’re in luck: most lenders are open to working with businesses that can showcase they’ve got the skills to stay in operation for a while.

 

If not, however, you might just have to make higher monthly payments or a larger down payment upfront.

 

Credit Score

Your credit score is also important, which will show lenders who timely and reliable you are with your payments, both personally and professionally. This will also impact your monthly rates.

 

Business Stability

Having a good track record for your business never hurts. As long as you have a business that is doing well most of the time, a lender’s going to be more open to giving you the money you need to start or grow your business.

 

Frequency of Customers

Like any business seeking outside funding, it helps to have a steady flow of sales. This will help ease the mind of any risk-averse lenders.

 

Of course, this is virtually impossible if you’re a startup. Just be prepared to make a larger down payment if you’re a newer business.

 

Regardless of where your business financials are at, it’s critical to seek outside financial help if you want to push your captive finance company to the next level. It’s honorable to grow off of your own funds, but you can capture a larger market if you have more financial manpower to back your campaigns.

Elevate Your Captive Finance Company

 

A quick way to stand out as a captive finance company is to go the “private label” route and offer your services similar to a direct “lender” of financing. Instead of fronting all of the cash on your own, you can partner with a bank to back up your financing services to any client you seek out.

You might have better luck securing higher-end clients if you’re able to offer services as a private label “lender,” even if you’re not using all of your own funds to provide financial services to your client and their customers. 

By having a relationship with a bank like this you can create special programs and the bank will be willing to give special credit considerations to your transactions. There are ways to get vendor recourse involved in order to get all of your transactions approved. 

 

Ready to set up a captive finance company to increase profits and sales?

Call 866-458-4777 to speak with a vendor finance program specialist and Discuss Getting Funds for Your Captive Finance Company.

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