Alex Griffin, Director of Product at Close Brothers Motor Finance
When it comes to your business and its finances, we understand the various options on the market - and the added complication of the dreaded small print - can feel overwhelming and confusing.
For this reason, after hundreds of conversations with dealers up and down the country over the course of my time in the industry, I’d like to discuss and address five common myths about dealer funding. But first, clearing the cobwebs, what exactly is dealer funding?
Dealer funding is a form of funding whereby you can borrow cash from a lender, such as Close Brothers Motor Finance, to grow your business without using your own money. It can be used to stock vehicles or make improvements to your forecourt and facilities.
Fully understanding how dealer funding works and its potential advantages is important. Dealer funding can be the key that opens your business’ doors to a world of new growth potentials and possibilities.
Now that’s cleared up, let’s get cracking and move onto tackling some myths about dealer funding.
Myth #1: ‘I can only use dealer funding on specific stock’
Many dealers share the concern that using dealer funding limits their freedom over where they can source their vehicles to stock their forecourts with. This is true for some lenders, where funding works like a store card that you can only use at certain auction houses.
Our product is available to use with a range of stock sources. What’s more, our dealer funding product also provides dealers with exclusive Forecourt Insight dashboard, which helps guide you towards profitable stock that’s tailored to the needs of your customers, ultimately increasing sale turnovers and profits.
Myth #2: ‘Dealer funding means I’m no longer in control’
It’s reasonable and fair to say that the thought of borrowing money for business purposes can feel risky and, possibly, like a blow to your financial control. However, dealer funding can increase the power and control you have over your money and financial decisions.
A stocked forecourt is essential for a successful dealership, so refreshing your forecourt is non-negotiable. Dealer funding helps you stock your forecourt with vehicles without the need to exhaust your own funds. This means you can purchase vehicles that you wouldn’t otherwise have the cash flow to purchase, or alternatively, free up cash to invest in other areas of your business. This means more money for staff training, doing up the forecourt, and improving your website and social media.
Myth #3: ‘For dealer funding to work the loan amount needs to be huge’
Some people think that dealer funding is an ‘all or nothing’ approach. There is a myth that you either apply for a large facility which you’ll use to cover the entire costs of stocking your forecourt, or you use entirely your own cash to do so. But dealers can adjust the amount of money they want to borrow with a huge degree of control and freedom, as well as continuing to buy stock with your own capital.
What’s more, you can flex how much you use; we don’t charge for the full facility, just for the amount utilised. For example, if you get a £100k facility approved but only use £60k to buy stock, your charges will apply to the utilised amount.
Our funding products offer loans starting at £30,000, and for those who wish to borrow more there is no upper limit.
Myth #4: ‘This sort of funding isn’t aimed at, nor works for, independent dealers’
Franchise dealers and vehicle supermarkets are using dealer funding as part of their core business practices; it is how they operate. But the assumption that dealer funding is only useful for this type of supplier is wrong. Dealer funding is a great tool to help independent dealers build and grow their business and is something Close Brothers Motor Finance have offered their partners for many years.
We know independent dealers are extremely busy, so our product is designed to start small and then build in partnership. You might come on at £30k, get more vehicles on your forecourt, create more choice for customers, and drive better sales… meaning you want to increase up to £50k, then £75k, and beyond.
Myth #5: ‘Dealer funding is only an option if you can pay back the loans immediately’
Dealer funding is meant to help you generate profit, not accumulate costs. We know money doesn’t grow on trees; our product is designed to help you generate profits from sales before the loan charges are due. We charge monthly in arrears – so a loan taken on 1st June wouldn’t have any fees due until mid-July. In some instances, your stock could be sold before any charges become due, especially if you use Forecourt Insight to ensure you’re buying the right stock, at the right prices, for the customers in your area.
