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Should I finance my customers product?

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Kokaka

Contributor
Aug 9, 2019
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Hi all.
So Im currently in my 5th month of my medical aestetic machine business and as it stands, no bank or leasing company is willing to finance anything.
That got me thinking, why dont I finance for my customers?
So I got a customer who wants to buy machines for about 100k and we cant get the deal financed.
The machines will cost me 35k to import.
The customer dont have any money but Im thinking of telling them they need to scrape together 10k and I will try to get a loan on mu business for the reminding 25k.
She will pay me 2k untill the 100k is due + 10k in interest, netting me a profit of 75k over about 72 month.
I have a contract that if she cant pay, I have the right to take back the machines after 3 month.

So in essence, she will pay back the loan first and after 16 month, I will go plus.
I believe she will be able to pay me back without problem but its not fun taking a loan to finance your customer. Then again, I will have a small down payment and can resell the machines if I have to.

Any thought, tips or reccomendations would be great
 

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Kid

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If she will default, can you sell the machine to someone else and pay off your loan?
 

Kokaka

Contributor
Aug 9, 2019
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If she will default, can you sell the machine to someone else and pay off your loan?
If she will default, can you sell the machine to someone else and pay off your loan?
Yes. And with the 6 month upfront payment that should give me some time to sell it to someone else.
I could also keep the machines for myself because I need them when I open my second clinic regardless and will have "gained" 10k from her down payment.
Everything is just a little scary for my now because I sell very expensive machines as my first business so Im new to everything
 

Kid

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Yes. And with the 6 month upfront payment that should give me some time to sell it to someone else.
I would be worried by your loan. If someone would take collateral then in case you can't pay it off they would go after your first clinic. Which actually would become a downward spiral - if they would close your first clinic you wouldn't have income to grow.

Being in your shoes i would consider what would happen if you wouldn't sell that machine in 6 months.
How many people buy those on average?
Whats the price of "not new" machine?

Anyway good luck and take your time.
 

Kokaka

Contributor
Aug 9, 2019
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I would be worried by your loan. If someone would take collateral then in case you can't pay it off they would go after your first clinic. Which actually would become a downward spiral - if they would close your first clinic you wouldn't have income to grow.

Being in your shoes i would consider what would happen if you wouldn't sell that machine in 6 months.
How many people buy those on average?
Whats the price of "not new" machine?

Anyway good luck and take your time.
Yes that is what is worrying me.
The thing is, with every payment after the first. My risk will diminish. After 12 month I will be break even and the profit is very high.
So lets say the customer gets bankrupt after 3 month. That will give me about 9 month before I will start to pay out of pocket.
In 6 month I believe I have to get the same machines to my own clinic regardless anyway.

The customer also has had a clinic with a partner before but they split up so she has a customer base, 30k followers with her to her new clinic.

Also at the moment. I have 16 machines in the last 3 month that needs to be financed. So if the deal goes sour, I can continue to rent out the machines to one of them I hope. Still a risk tough. Or maybe not?
The disadvantage by beeing a new businessman is lack of experience to know a real risk from a non risk deal
 

Kid

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In 6 month I believe I have to get the same machines to my own clinic regardless anyway.

The customer also has had a clinic with a partner before but they split up so she has a customer base, 30k followers with her to her new clinic.
This sheds some positive light on the situation.
Using machine instead of letting it lay dormant is good move.

Having experienced buyer increases her chances to succeed also (and paying off the loan).

I think it's worth to sleep over the whole situation to see if there are no other obstacles.
 

Kokaka

Contributor
Aug 9, 2019
120
71
56
This sheds some positive light on the situation.
Using machine instead of letting it lay dormant is good move.

Having experienced buyer increases her chances to succeed also (and paying off the loan).

I think it's worth to sleep over the whole situation to see if there are no other obstacles.
Yes I have been thinking about this deal for a long time now.
And as long as she pays for 12 month. I cant loose.
The only risk I see is that she gets bankrupt after 3 month. Happend to another customer of mine but they where super inexperienced and did everything wrong.
Luckely for me, I got all financed through a leasing company so now its their problem.

So if she stops paying after 3 month, the machines will come back to me after 6 month (In the contract, she has 3 month to pay before I take back the machines)
If that happens I will most likely use the machines myself with a 16k discount.
But that is only if I continue to bee fully booked like I am now (3 week cue at the moment)

Worst case scenario is if she steals the machines. That would be a mess. But I dont know how big of a risk that is.

On the flipside. If I can get this deal going. She has told me she will open another clinic in Autumn so I will have made about 200k profit in total on the customer if everything works.
 

Kid

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Worst case scenario is if she steals the machines. That would be a mess. But I dont know how big of a risk that is.
Just a thought but are there insurance companies that would cover this?
It would eat into profits but worst case would be covered.
Or maybe split a cost of insurance with the buyer.
 

Kokaka

Contributor
Aug 9, 2019
120
71
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Just a thought but are there insurance companies that would cover this?
It would eat into profits but worst case would be covered.
Or maybe split a cost of insurance with the buyer.
Thats a great Idea!
I am willing to pay anything to remove the worst case scenario.
Thanks alot. Will call insurance company tomorrow.
 

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