Makes sense. I wonder if they also offered no fees (6,12,24 months) as a form of loan as well if that would be appealing to their customers. At the end of the term, you'd be responsible for paying back all the fees during the term plus interest.
I don't think they are a lending company. They do not charge interest, their model lets you pay over time, and you pay a fixed fee to extend the payments. It's all fee based, no interest, so i think there's some regulations they get to sidestep.
It looks that way. It seems to be structured as a 24-month installment loan (financed by a third party), with an option at 12 months to trade it in, end the old loan, and start a new one.
You get that in the US too, however I wouldn't call it a loan because if you sign for a 1 year term and then cancel or switch providers after a month you get your money back
It's more like a SaaS offering you a discount for paying yearly
The loans may also be genuine interest free - but with a few caveats such as settling by a certain date to avoid penalty fees and such. There will be enough people falling into this trap to make it profitable for the loan company.
Quite often the same loan company is also financing the dealer's stock so there are also hidden incentives for him to push loans - such as preferential rates for himself.
What I don't understand about those, is like... you can basically just make the "minimum payment" for 12 months straight? So if you spend 15k in that timeframe, you basically free up 15k in capital that can be invested? It's like a 0% loan.
Super curious about this. There must be some way that the loaner knows what to expect for the next year. If that's true is the loaner paying based on your expected revenue with the upside being that you might grow further?
There is no timeframe on repayment of the loan. If founders want to keep reinvesting in the business that is fantastic. If they want to start taking more out for themselves, that's when the distributions kick in. We hope that helps keep our incentives aligned.
Bingo. That's why I've done payment plans as well. Not because I couldn't just buy the thing, but because spreading the payments out over 12 months means more investment capital.
Both of those require 1+ year in business and significant revenue. So yes, this is definitely a loan and it has relatively bad terms but it's targeted at businesses with no credit.
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