Financial solutions for the Motor Trade

The motor trade ranges from individual traders who may sell used cars from their home to main dealers who sell both new and used vehicles from their forecourts. Many people start trading with a single vehicle, but to stand a chance of success, your business will need a choice of cars or vans, which will mean a sizable investment.

Operating from your home does not give potential customers the impression that they are dealing with a professional business. You will need premises to work from, perhaps with a workshop, and certainly with a prominent location.

Motor trade insurance will be a legal requirement. There are insurance services available which can cover building and contents insurance, as well as public liability and other risk factors you’ll face.

You will also need a website. These days a web presence is vital for any business. It is particularly important for the motor trade, as customers will want to check you to ensure that you are running a professional business. You can do a great deal of business purely online, and customers need it to  find and contact you. Your physical location is important, but your internet presence can be more important still. Be prepared to spend in excess of £10,000 for a tailor-made website.

You’ll also need staff. You can’t run a business with a forecourt open from perhaps  08:00 to 20:00 single handed. You’ll still need to go to buy stock at auctions, to drop cars of to the workshop or deliver them to customers.

There are other costs to consider. Trade plates, staff and overheads all mean costs even before you have sold a single vehicle.

Understanding your funding options

At  Rangewell, we work with motor traders across the UK. We help them find the financial solutions that they need.

They include:

• Funding for stock
• Funding to buy or set up a business
• Funding for premises
• Funding for equipment
• Funding to support cashflow
• Funding for tax

Funding for stock

You will probably buy vehicles to sell on at auction, or through trade sources. Both may require upfront funds.

The level of funding you need will depend on the level of vehicles you are supplying, and the number you will hold at any one time.  If you want to have 10 cars actively for sale on your forecourt or website, you'll probably need another 3-5 at the prep stage, and have another 3-5 sold but awaiting handover. Finance for 20 midrange vehicles could easily cost between £150,000 - £200,000.

It may be possible to provide this level of funding as a Secured Loan. Secured loans can be used to borrow large sums They are called ‘secured’ because the lender will require the pledge of security from you, in case you cannot pay the loan back. This may often be your home.

You can have longer to repay than other types of loans. Terms of up to 20 years are common. You can also enjoy lower interest rates than with other types of lending, meaning monthly repayments can be lower and easier to fit in with your cashflow.

Buying or setting up a motor trading business

Setting up as a trader will mean a wide range of costs - stock, insurance, and a website, premises and staff. Whatever the scale of your business plans, getting the necessary vehicle finance can be a challenge, as many lenders are wary both of the sector and of start-ups in general. Most prefer to see existing trading records as the basis of their decision-making process.

However, at Rangewell we know lenders who are able to take a more positive approach and can often help arrange funding for start-up ventures, based on solutions such as secured or unsecured loans. We can even help find ULEZ vehicle finance if there is demand for it in your area.

We can also find solutions if you want to buy an existing business. Although the costs may be much higher than those required for a startup, the ability to demonstrate profitability can help secure the necessary funding. One solution for acquiring a business with existing assets is a ‘jigsaw’ finance deal, which uses a variety of funding types to  provide the most cost effective funding for each aspect of your finance needs.

Funding for your premises

Your business will need secure parking for vehicles and probably a workshop - unless you are planning to put all prep work out. A leased unit in a prominent location may be a good first step, and you may need to borrow the deposit on a long term lease as part of your business plans.

You could also consider buying premises, with a Commercial Mortgage, which can be used to buy land as well as buildings, and under some circumstances can even be used to buy an existing business. Commercial property finance is arranged on an individual basis. It is uneconomic to borrow less than £50,000, and some lenders have a minimum of £75,000 or more, but there is no set upper limit.

If you already own your premises, taking out a Commercial Mortgage on it might be a cost-effective way to raise funds to use elsewhere in your business.  

Funding for your equipment

Whether you are starting up, buying into an existing business, or ready to move your current operation on, you will need equipment.  This can be as simple as basic office equipment and IT, but it could potentially include your own vehicles such as a trailer or beavertail truck for delivery and collection, and workshop equipment.

At Rangewell we have found that Asset Funding can provide the most cost-effective solutions for most kinds of equipment. Leasing and Hire Purchase let you spread the cost of the equipment you need, with fixed monthly repayments helping you to budget with confidence.

Hire Purchase

• For basic equipment that you want to go on giving service for many years, Hire Purchase may provide the simple way to spread costs.
• With Hire Purchase you pay a deposit plus monthly instalments over a fixed term, between 12 and 72 months, after which the equipment becomes yours.
• Payments are fixed, making it easy to plan ahead, and to arrange an agreement that is tailored to your monthly turnover and budget.

Leasing

• If you want to use the latest equipment without the responsibility of owning it, leasing will give you the freedom and flexibility you need.
• There is usually no upfront cost to find, meaning that you can bring the latest equipment into your business without delay.
• Finance leases can make higher cost items, such vehicles, more affordable by spreading the cost across their economic life.

Refinance your existing assets

Your business may have investment tied up in your existing assets such as your workshop. Asset Refinance lets you release that money, while still having full use of your assets. The finance company will first buy an asset such as your vehicle fleet from you. This will provide you with a large cash sum, which you are free to use as you need.  

The lender will  then let you buy the asset back from them, under a new finance arrangement.

A refinance agreement can help you raise the cash tied up in assets. Alternatively, you can arrange refinance on an asset you are still paying for, to reduce your monthly outgoings. 

Funding to support your cashflow

Running your business will mean ongoing costs – and it is vital to keep your cashflow healthy, even when sales are slow - remember, your business will face seasonal ups and downs.

There are a number of solutions to consider:

Working Capital Finance

Working Capital Finance is designed to boost the working capital available to a business. It's often used to provide cash to pay staff during the early weeks and months of opening  for business or during a period of growth. It is designed to be repaid in the short- to medium-term.

Our finance experts can help solve your working capital needs. 

Growth Finance

Large-scale finance can be vital if you have major plans for your business, such taking on more people with key skills and experience.

Even if your business does not have an established profit record that lenders usually require, we can help you find solutions based on specialised Growth Finance lending.

Tax Loans

Large quarterly VAT bills or annual tax demands can cause problems with your cashflow, particularly when they fall at the same time as other costs.

Tax Loans help you to spread the cost of your tax demands into affordable monthly payments, ensuring that your business does not have to go through cashflow difficulties because of a minor tax liability.

See how a Tax Loan can mean better control of cashflow with fixed monthly payments.

Why you need Rangewell to find finance for your motor trade business

Not all lenders will be able to offer the right solution for every need, or the most competitive rates. At Rangewell we can help find the  lenders and the lending solutions that are most appropriate for your business.

We know the lenders who can offer the most competitive rates for all types of finance, including Professional Loans, Unsecured and Secured Loans, Invoice Finance, Asset Finance, Commercial Mortgages, Growth Finance, ULEZ vehicle finance and more.

As well as conventional loan products, we can also help you find Alternative Funding, using new loan providers and innovative funding solutions.

So, whether you have a straightforward, small-scale funding need, or require a complicated ‘Jigsaw’ funding plan made up of a combination of financial products, we can work with you to find the answers to help you make the most of your business.

Call us now to get our experts working for you.