An Australian Credit Licence (ACL) can give you two possible authorisations. They are:
- ‘engage in credit activities as a credit provider’ and
- ‘engage in credit activities other than as a credit provider’.
ASIC gives ACL holders either authorisation and, in some cases, both.
ACL holders are only allowed to authorise their Credit Representatives to ‘engage in credit activities other than as a credit provider’.
Vendor Finance Institute’s ‘Credit Representative Program’
VFI conducted a risk/reward analysis of our long running Credit Representative Program (CRP) a few months ago and came to the conclusion that the reward we receive from each of our Credit Reps ($95 per month) came nowhere near compensating us for the, almost open ended, risk we are exposed to from the CRP.
This conclusion was compounded when we took into account the fact that our old Professional Indemnity (PI) Insurance did not cover us for vendor finance activities.
A Stay Of Execution
Just after we completed our risk/reward analysis the FBAA Vendor Finance Steering Committee was formed and the prospect of vendor finance PI Insurance becoming a reality became possible.
With FBAA vendor finance PI Insurance now in place our CRP has had a permanent stay of execution but is there another path to Credit Representative status?
An Alternative Path
Recently one of our Credit Reps let me know that he’d like to add mortgage broking activities to his vendor finance business. We talked about various mortgage Aggregators and he went off to do some research.
He came back with some interesting news. He’d found a mortgage Aggregator that would:
- Allow him to be their Credit Rep
- Allow him to do undertake vendor finance transactions, if
- His PI Insurance specifically allows vendor finance transactions.
Vendor Finance PI Insurance Opens More Doors
If this large Aggregator is allowing this, I’d guess they won’t be the only Aggregators to allow their Credit Reps to do vendor finance transactions, if they have the appropriate PI Insurance.
This particular Aggregator is quite a bit more expensive than the VFI CRP but they do supply quite sophisticated mortgage broking software.
We will keep our CRP running but we wanted you to know that there are now alternatives and further research could possibly turn up less expensive Aggregators.
We’d love to hear what you discover from various Aggregators. Let us know and we’ll get the information out there in a future VFI News.
Vendor Finance Management
The services offered by Vendor Finance Management (VFM) are designed to free you from administration and get you back doing more vendor finance transactions. If you’d like to experience this convenience, VFM can help.