Dealer finance questions, answered properly

Most dealers start by working with an asset finance broker rather than becoming a lender or seeking FCA authorisation themselves. In practice that means agreeing how enquiries are passed over, what your staff can say at the point of sale, what you can put in adverts, and who speaks to the customer about terms and documents. If your customers are mainly limited companies buying for business use, the arrangement is usually straightforward because that lending generally sits outside the FCA consumer credit regime. If you also sell to sole traders, you may need appointing as an Introducer Appointed Representative by the authorised principal. All finance is subject to status, affordability and lender approval.

Working with an asset finance broker normally involves no set-up fee, no software licence and no minimum volume. The broker is usually paid a commission by the lender on completed deals, so your direct cost is time: gathering asset and customer information and keeping the deal moving. Two things can cost you money if you agree to them. First, subsidised or supported schemes, where the supplier contributes towards the cost of the finance and that contribution comes out of your margin. Second, clawback terms if a completed deal is later unwound. Ask for both in writing before your first deal, alongside the introducer agreement itself.

It depends on who your customers are. If you sell mainly to limited companies buying for business use, the finance is generally unregulated and you can usually start passing enquiries to a broker within days — the real work is agreeing the process, the wording you use and who contacts the customer. If you need appointing as an Introducer Appointed Representative because you introduce sole traders or small partnerships for regulated agreements, allow longer. The authorised principal has to carry out due diligence on your business and its owners and notify the FCA before the appointment takes effect, and that notice period is commonly around 30 days. Several weeks is realistic.

Not necessarily. Arranging finance for a limited company borrowing for business purposes is generally outside the FCA consumer credit regime, so no authorisation or appointment is normally required to introduce those customers. The position changes when the customer is an individual in law — a sole trader or a small partnership. Broadly, business-purpose lending above £25,000 to an individual is exempt, while below that threshold an agreement can be regulated. Introducing customers for regulated agreements is credit broking, which is a regulated activity. Most dealers handle this by being appointed as an Introducer Appointed Representative of an authorised principal rather than seeking direct authorisation. This is general information, not legal or compliance advice.

Yes, but the advert is a financial promotion and carries rules. Where regulated agreements are involved, an unauthorised dealer generally needs its promotions approved or issued by an authorised firm, and an Introducer Appointed Representative should use material its principal has approved. Keep claims substantiated: “finance available, subject to status” is acceptable; wording implying acceptance is certain, or that credit will definitely be granted, is not. If you quote any rate, monthly payment, deposit or term you trigger further disclosure requirements, which is why most dealers avoid figures in general advertising. Even for unregulated business lending, advertising standards and consumer protection rules still apply. Agree wording with your broker before it goes live.

You should not. A broker is there to arrange the finance, not to sell to your customer. Agree three things at the outset: who speaks to the customer about payments, documents and payout; how and how often you are updated at each stage; and what the broker may do with the customer’s data afterwards. If you do not want your customer marketed to, or introduced to a competing supplier, put that in the introducer agreement in writing rather than relying on goodwill. A good broker will copy you into progress so you can plan delivery. A broker who will not commit to any of this is telling you how the relationship will run.

Regulated agreements fall under the Consumer Credit Act and FCA conduct rules, which bring pre-contract disclosure, cancellation rights, affordability requirements and access to the Financial Ombudsman Service. Unregulated agreements do not carry those protections or obligations. As a working rule, finance to a limited company for business use is generally unregulated, so most business asset finance sits outside the consumer credit regime. Where the customer is an individual in law — a sole trader or small partnership — it depends on the amount and purpose. Broadly, borrowing wholly or predominantly for business purposes above £25,000 is exempt, and below that it may be regulated. Consumer hire has separate rules. Check each deal rather than assuming.

Yes, and for a dealer it is the single most important question to ask early. A limited company is a separate legal person, so business-purpose finance to it is generally outside the FCA consumer credit regime. A sole trader is an individual in law, and so is a partnership of two or three partners where not all of them are bodies corporate. For those customers an agreement can be regulated depending on amount and purpose — broadly, business-purpose lending above £25,000 is exempt and below that it may not be. The answer changes what your staff can say, what the lender needs, and whether you require appointing as an Introducer Appointed Representative.

An Introducer Appointed Representative, or IAR, is a firm appointed by an authorised principal to do two limited things: effect introductions to that principal or to other authorised firms, and distribute financial promotions the principal has approved. The principal takes regulatory responsibility for those activities, carries out due diligence on the introducer, notifies the FCA, and the appointment is shown on the Financial Services Register. Knowing who the principal is matters. CW Asset Finance is itself an Appointed Representative of Rural Finance Limited, so a dealer introduced through CW Asset Finance would become an Introducer Appointed Representative of Rural Finance Limited — not an IAR of CW Asset Finance.

An IAR can tell a customer that finance may be available subject to status, pass the customer’s contact details to the principal or broker with consent, and hand out promotional material the principal has approved. It can be paid for that introduction under its agreement with the principal. It cannot advise on which product or lender is suitable, negotiate or explain the terms of an agreement, complete an application on the customer’s behalf, assess affordability, or run its own finance advertising that has not been approved. Once a salesperson starts working through structures and monthly payments, they have gone beyond introducing. Train whoever handles enquiries on where that line sits and keep the handover short.

Yes, provided the arrangement is set up properly. For unregulated business deals with limited companies, an introducer fee or commission share is largely a matter of contract between you and the broker. For regulated agreements, you generally need to be appointed as an Introducer Appointed Representative by an authorised principal before you can be paid for the introduction, and the payment sits under that appointment. Commission arrangements may need disclosing to the customer, and both lenders and principals increasingly expect that disclosure to be clear rather than buried. Get the fee basis, payment timing and clawback terms in writing. Taking fees for regulated introductions without a valid appointment is where firms come unstuck.

The consequences are real. Carrying on a regulated activity such as credit broking without authorisation or a valid appointment is a criminal offence under the Financial Services and Markets Act, and an agreement made through an unauthorised broker can be unenforceable against the customer unless a court or the FCA allows it. Non-compliant advertising can be withdrawn and ruled against. A principal that finds an introducer acting outside its permitted activities will normally terminate the appointment, and that termination is visible on the Financial Services Register. Most problems come from drift rather than intent — staff explaining terms, or running unapproved adverts. This is general information and not legal or compliance advice.

For a first look, most brokers need three things. The asset: make, model, year, hours or mileage, new or used, and whether it is VAT qualifying. The transaction: total price, any deposit or part exchange, whether VAT and delivery are included, the term the customer wants, and who the supplier is. The customer: full legal name, company number or trading address, how long they have traded, and how the asset will earn money for the business. A proforma invoice speeds everything up. Larger or non-standard deals usually attract requests for recent accounts, bank statements, director details and consent to credit search. Any decision remains subject to status, affordability and lender approval.

For a straightforward limited-company proposal on a standard asset with complete information, an indicative decision often comes back the same working day or within one to two days. Larger amounts, newly formed businesses, unusual assets, or anything requiring accounts and bank statements take longer, because the lender is underwriting the business rather than scoring it. After a decision there is still documentation, identity and bank verification, and for used assets sometimes an inspection or title check, so allow a few more days before payout. Incomplete proposals are the most common cause of delay, so send everything at the outset. All decisions are subject to status, affordability and lender approval.

First, find out why. A decline can be about the customer, the asset, the amount, or simply that lender’s appetite at the time, and the reason determines what happens next. A broker with a panel can approach other funders whose criteria fit better, but should do so selectively rather than submitting everywhere, because repeated credit searches leave a footprint on the customer’s file. Many deals can be restructured: a larger deposit, a shorter term, a personal guarantee, adding a part exchange, or moving to a lower specification. Sometimes the honest answer is no for now. Never tell a customer that acceptance is certain while an application is still outstanding.

Yes, many lenders fund used equipment and vehicles, and some are comfortable with auction purchases, subject to status and lender approval. The usual constraints are the age of the asset at the end of the term, having a proper VAT invoice, and title and outstanding finance checks to confirm the asset is unencumbered. Auctions add pressure because payment deadlines are short and storage charges start quickly, so get the customer assessed before the sale rather than after the hammer falls. Private sales between two individuals are harder and some lenders will not fund them at all. Higher-value used assets may require an engineer’s inspection or an independent valuation.

Yes, and this is one of the practical advantages of asset finance over a standard loan. Depending on the lender and the customer’s profile, payments can be made annually or quarterly, weighted towards a trading season, deferred for the first few months while the asset is commissioned, stepped up as output increases, or arranged with a balloon at the end to reduce the regular payment. On hire purchase the VAT is normally due at the start, although some lenders will defer it for a period. Structures are agreed at proposal stage, not afterwards, so tell the broker about the cash flow pattern before submission. Availability is subject to lender approval.

Often yes. Where a customer owns an asset outright, or holds significant equity in it, a lender may be able to refinance it and release capital — commonly described as capital release or sale and hire purchase back. Those funds can then go towards a purchase from you, which can move a stalled sale forward. The lender will want to confirm the asset is genuinely unencumbered, check its age and condition, and value it, and the sum released is normally well below open market value. Where the customer is an individual rather than a company there are additional legal considerations, so raise it early. Subject to status, affordability and lender approval.

In most business asset finance the broker is paid a commission by the lender once the agreement completes and pays out. Some deals also carry a fee charged to the customer, typically where the amount is small or the work involved is heavy, and some carry both. A broker may also share part of its commission with an introducing dealer under a written agreement. What matters to you is transparency: ask how the broker is paid on the type of deals you will introduce, whether the customer pays any fee, and whether the arrangement is disclosed to the customer before they sign. A broker who avoids answering that plainly has answered it.

Not as a rule. A broker does not add a margin on top of a fixed bank rate; they place the deal with lenders whose criteria and pricing suit that customer and that asset, including funders the customer cannot approach directly. A bank may sometimes price more keenly, but frequently wants a debenture or all-monies charge over the whole business, whereas asset finance is normally secured principally on the asset itself. Compare the full picture: total cost over the term, arrangement and option-to-purchase fees, security taken, settlement terms and speed of drawdown. A keen headline rate on a facility that arrives too late does not help you deliver the machine.

Handle this before it happens. The safest rule is not to order stock or commit to a supplier until the customer has signed the finance documents and the lender has confirmed payout, because offers lapse and conditions change. If a deal collapses after payout — a cancelled order, a rejected asset, an early unwind — the lender will usually reclaim funds from the supplier, and the broker’s commission may be clawed back, so expect your introducer agreement to pass that through to you. Ask what happens to customer deposits, who holds them, and on what terms. Get the cancellation and clawback position in writing before your first deal rather than during your first problem.

There is no requirement to. Many dealers use a small panel so there is cover for holidays and a second view on awkward deals. What is counterproductive is sending the same customer to two brokers at once: it produces duplicate credit searches, confuses the customer and annoys lenders who see the same proposal twice. The better discipline is one broker per deal, chosen deliberately. If you become an Introducer Appointed Representative, remember the appointment is with a specific authorised principal; multiple appointments are possible but require agreement between the principals, so it is not something to arrange casually. Only trade exclusivity for a concrete, written service commitment.

Ask for their FCA status and firm reference number, and whether they are directly authorised or an Appointed Representative and of which principal. Ask about trade body membership such as the NACFB, the lenders they genuinely place business with rather than a wall of logos, who owns the customer relationship and data after payout, how they are paid and whether the customer pays a fee, typical turnaround from proposal to payout, who your day-to-day contact is, and how they handle declines. If you will introduce sole traders, ask whether you need appointing as an Introducer Appointed Representative and with which principal. Get the introducer agreement, including clawback terms, before the first deal.

A good broker tells you early when a deal looks unlikely and explains why, rather than leaving you hopeful. They ask for full information before quoting, place proposals with suitable lenders one at a time instead of scattering credit searches, and are straightforward about how they are paid. They know the assets you sell, know which funders like them, and can discuss residual values, end-of-term options and settlement without hedging. They raise the regulatory position themselves instead of waiting for you to. The warning signs are promises that a deal will be approved before any underwriting, figures produced before anyone has seen the customer, vagueness about FCA status, and pressure to commit stock before documents are signed.