In House Financing
Financing of furniture and appliance sales is the lifeline to money making success. To provide customers with selling and financing options is the goal of ever retail furniture and appliance store. In house financing can be used in conjunction with other finance options, such as primary finance companies, layaway, credit cards and cash.Getting started is probably the hardest part most retail furniture and appliance stores face. That is why F and I Systems has developed a consumer loan model that can be presented to your local banker.
The model is based on the bank funding Retail Installment Loans for furniture and appliance dealers. It reflects requirements expected from both the furniture and appliance dealer, as well as the local bank.
The model is based on the average dealer providing 15 loans a month averaging $1,000.00 each loan.
A Dealer Reserve Account (DRA) will be established in the dealer’s name, and in a very short period of time, will be more than enough to cover losses (with good performance).
The bank that participates in the program will have full recourse with the furniture and appliance dealer. If a note becomes 90 days past due, the bank will pay the note off from the Dealer Reserve Account. If the Dealer Reserve Account does not contain adequate funds, the dealer will then purchase the note using new business funds.
Advantages to the Dealer
Provides:
- Financing Source
- Expand Market
- Increase Profits
- Monthly Growth of Dealer Reserve Account
- Most furniture and appliance dealers have two or three finance companies that they try and get their customers approved to purchase something of value in their store. The dealer spends a lot of time trying to get about 40% of their customers approved for finance.
- The Dealer Bank Model will open up a new customer base for your store. The customer that is turned down will now have an option on how to purchase with your customer Retail Installment Plan.
- The Dealer Bank Model will increase profits because you will make more sales.
- The Dealer Reserve Account will become a company asset that will be in the bank in your name.
- New Commercial Account
- New Customers
- Community Awareness of Bank Services
- The Dealer Reserve Account becomes a new savings account for the bank. The line of credit now becomes a new commercial account for the bank.
- The furniture & appliance dealer will now bring new customers for the bank.
- There is community awareness of bank services. The bank spends a large amount of money for advertising. The furniture store will provide more new customers with no investment from the bank.
- Dealer will furnish the bank with a signed and completed credit application.
- Dealer will furnish the bank with a credit report from a recognized credit bureau.
- Dealer secures a minimum of 25% down payment on each sale.
- The bank will provide the dealer with a monthly note status with a 30-60-90 day delinquency report.
- The bank will establish a Dealer Reserve Account and will provide the dealer with a monthly statement.
The Dealer Reserve Account is established in the following:
Purchase Price of Goods Sold
| Purchase Price | Deposit in the DRA |
|---|---|
| 0 - $ 500.00 | $ 75.00 |
| 501 - $1000.00 | $ 150.00 |
| 1001 - $1500.00 | $ 225.00 |
| 1501 - $2000.00 | $ 300.00 |
| 2001 - $3000.00 | $ 375.00 |
| 3001 - and up | $ 450.00 |
| RECAP | |
|---|---|
| Average DRA Deposit Per Note | $ 150.00 |
| Average Number of Contracts Monthly | 15 |
| Average Deposit to DRA Monthly | $2250.00 (15 X $150.00) |
| Average Deposit to DRA Annually | $27000.00 (12 months X $2250.00) |
| The ABC Furniture Company | |||
|---|---|---|---|
| Contract Date | 09/15/06 | First Payment Date | 10/15/06 |
| Fin. Chg. Start | 09/15/06 | ||
| Taxable | $1000.00 | Non Taxable | |
| Delivery | Total Purchases | $1082.50 | |
| Tax | $82.50 | ||
| Previous Balance | |||
| Cash Down | $250.00 | ||
| Due Down | Net Balance | $832.50 | |
| Number of Payments | 24 | ||
| Amount Financed | $1037.38 | ||
| Insurance / Fees | Finance Charge | $248.78 | |
| Credit Life | $11.06 | Total of Payments | $1286.16 |
| I.U.I. | $35.37 | Deferred Payment Price | $1536.16 |
| Accident & Health | $29.59 | A.P.R. | 21.56% |
| Property | $118.86 | ||
| Fees | $10.00 | -------Payments------- | |
| Total Ins. & Fees | $204.88 | 24 at $53.59 | |