Since the Finance Brokers Association of Australia (FBAA) made a decision to represent vendor financiers and, more recently, since the first round of FBAA Vendor Finance Meetings, there has been a resurgence in interest in the Vendor Finance Industry.
Hence this issue of VFI News. An issue dedicated to those new comers to our great Industry.
Back in 2003 when Karen and I started in Vendor Finance (VF), if you thought you were a vendor financier you were J That is, there was little regulation, of any substance, regulating our industry.
This shortage of effective regulation had its good and bad points but that all came to an end on the 1 July 2010 with the introduction of the National Consumer Credit Protection Act 2009 (NCCP). It was this NCCP that created the National Credit Code (NCC).
Credit Legislation Consequences
This nationwide legislation roped in most vendor financiers as most vendor financiers regularly used vendor finance techniques classed as ‘consumer credit contracts’ under the new NCC.
The NCC requires anybody or any company who “in the course of a business” provides consumer credit or consumer credit advice, to hold an Australian Credit Licence (ACL) or to be a Credit Representative (CR) of an ACL holder.
If your VF business will be the Title Holder (owner) of the properties you transact, I suggest you read But What If I Own It?
If your VF business will not be the owner:
- You do not need ACL coverage if you plan to use Lease/Options only.
- If you plan to use Instalment Contracts and/or vendor financed Mortgages in your vendor finance business, you need to be an ACL holder or a CR.
Real Estate Agent Legislation
Next, let me ask you a question. If you’re talking to a property seller about selling her/his property and, as a result of that conversation you make money from the sale, what are you acting as? There is only one answer and it’s, you’re acting as a real estate agent in every State and territory of Australia.
Again, if you’re the Title holder (owner) of the property you don’t need real estate agent licence coverage to sell your own property. However if you are not the owner you need to be a licensed real estate agent or an authorised real estate agent representative.
As a new entrant to the Vendor Finance Industry I would:
- Realise I am creating a professional business and accept that setting up such a business will inevitably have start-up costs;
- Become an authorised real estate agent representative. This will require a short Certificate of Registration (NSW) type course in the State you wish to register in. In VIC the course is called the Agent Representative Course (or Program). Google will quickly locate the course for your State. Alternatively, a full NSW real estate licence is reasonably straight forward to get and can easily be converted to any other State’s licence via ‘mutual recognition’ arrangements;
- Get a Certificate IV in Finance & Mortgage Broking (available as a 3 day, face to face course);
- Become an authorised Credit Representative, i.e. a representative of an ACL holder;
- Get some vendor finance specific education. There are a number of providers;
- Become a member of the professional association that covers Vendor Financiers, i.e. the Finance Brokers Association of Australia;
- Get support and answers to everyday questions by frequenting the ‘Vendor Finance Professionals’ Facebook group.
When considering joining the Vendor Finance Industry it’s worthwhile doing a comparison with the entry costs of joining other sections of the Finance Industry, e.g. a mortgage broking franchise. Depending what costs you include on your list, my estimate for setting up your own vendor finance business from scratch is about $10K. Here’s a breakdown of the costs involved.
Compare that with the cost of a well known mortgage broking franchise and you’ll be pleasantly surprised
Happy Financial New Year A time when tax accountants start asking for all those forms, statements and reports!
Vendor Finance Management’s clients almost enjoy the end of the financial year 😉 How could that be I hear you ask? VFM makes available an ‘End of Financial Year Summary’ report to all its clients that gives your tax accountant everything s/he needs. If you’d like to experience this convenience this year, Vendor Finance Management can help.