Sales Finance
Sales Finance Licensing
Sales finance company licensing is required for finance companies involved in almost every aspect of the retail installment sales contract life cycle. Whether your company is a retail installment seller, a sales finance company which purchases retail installment sales contracts from retail installment sellers, or a sales finance company which purchases retail installment sales contracts from sales finance company holders, your company will need sales finance licenses in most states where it does business.
This law firm’s typical sales finance company clients buy and sell retail installment sales contracts from franchised and independent motor vehicle dealerships, from consumer and commercial goods retailers, and from medical service providers and other professional service providers. In addition, this law firm also represents special purpose entities (SPE) and other finance vehicles in their sales finance licensing matters.
Sales Finance versus Direct Lending
Sales finance is often referred to as “indirect lending”. It is considered “indirect” because sales finance companies buy retail installment sales contracts which have been already entered into between retail sellers and their retail purchasers. Accordingly, sales finance companies do not have a direct contractual relationship with the retail purchasers in the initial retail installment sale transaction. In this situation, retail sellers self-finance the sale on an installment basis. When sales finance companies buy retail installment sales contracts from retail sellers, the funds provided by sales finance companies free up the retail sellers’ capital so that they can make continue to make more retail sales.
Retail sellers typically use retail installment sales contract forms which are either in a standard format used by many sales finance companies, or they use the specific forms of certain sales finance companies which buy their paper. Although the retail seller can set its own installment sale terms, installment sale transactions are usually underwritten either by the retail seller or the sales finance company purchaser so that they satisfy the underwriting requirements of sales finance company purchasers.
In contrast, direct lenders in a retail transaction lend directly to borrowers, who then use the proceeds of the loans to purchase the goods or services offered by the retail seller. The retail seller is not a party to the financing transaction. Instead of using retail installment sales contracts, direct lenders use promissory notes.
Licensing Differences between Sales Finance Companies and Direct Lenders
Although the business differences between indirect lending (sales finance) and direct lending may seem small, there are significant differences in licensing considerations for these two types of finance companies. The reason for this has to do with different perceived required levels of protection of a state’s citizens under these two financing scenarios. Indirect lenders serve as secondary market purchasers of retail installment sales contracts which have already been entered into between a retail installment seller and a retail purchaser. Accordingly, purchasers of those contracts may be viewed as a lower-risk of potential harm to the public than direct lenders, which deal directly with borrowers/retail purchasers and are actual parties to the finance transaction. Accordingly, license application requirements and regulator application investigations are more involved for direct lenders than for sales finance companies.
Give us a call today to discover how Vestevich & Associates, P.C. can assist your company with its sales finance licensing matters in all 50 states!
Personalized Sales Finance Licensing Assistance
Not only is Vestevich & Associates, P.C. a full-service licensing law firm, but we also provide personalized, one-on-one service that you’d expect from a specialized boutique law firm. Please give us a call today to begin discussing your sales finance licensing needs. We look forward to assisting your company with its sales finance licensing matters!
Sales Finance Licensing
Whether you purchase retail installment sales contracts from motor vehicle dealerships, from other types of retail sellers, or from Sales Finance Company holders, Vestevich & Associates, P.C. can assist your company with all of its sales finance company licensing needs throughout the United States.