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Sell Your Loans and Live Happily Ever After

My first job in the auto industry was doing double duty as the F&I Manager and the in-house debt collector for a BHPH dealership in Texas.


When performing the role of F&I Manager, it was usually pleasant to deal with someone who was buying a new car. Despite the fact that there seemed to be an endless supply of documents to review and sign, the customer was normally excited about their new ride and couldn't wait to show it off to friends and family.


After the paperwork was signed, keys and handshakes were exchanged, and the customer and dealership were enjoying what both believed would be an ongoing, amicable if not friendly relationship. The dealership had worked hard to put the person in the car they wanted and pledged to provide friendly service and great deals on future purchases. Customer's promised to make their payments on time, send referrals, and to return to the dealer when they were ready for their next vehicle.


In too many cases, it was the beginning of the end of a beautiful relationship.


You see, after you sold your customer a car, you turned them into a debtor. Someone who will owe you a lot of money for several years to come. Someone who in the course of those years is all but certain to miss a payment. Or two. Or three. Or... Well, you get where I'm going.


In the BHPH, nonprime lending industry missed payments are inevitable and an expected part of doing business. But is it the part of the business that you really want to deal with? Is debt collecting what you want that hard earned customer who promised referrals and repeat business to associate with your business?


No matter what causes your customer... oops, I mean, debtor, to fall delinquent, you must now remove the hero's hat of the friendly car dealership and put on the hat that represents the most despised villain of the nonprime borrower, "The Debt Collector!"


Sure, in some cases you can collect a delinquent payment or two with minimal effort on your part while creating no or little bad will with the debtor.


In some cases.


But far too often that is not the case. For those that aren't easily cured with a quick phone call, debt collecting is an expensive and time-consuming operation that almost always creates bad will between you and your customers. No matter the circumstances that are preventing your past due accounts from paying on time, you’re likely to be the target of their frustration when you contact them for payment.


Of course, this isn't the case for every delinquent customer. But for the those who regularly remain past due, the prospects of repeat business is now gone, and the promises of repeat business have devolved into negative remarks about your dealership to anyone willing to listen.


Most auto dealers are pros at selling cars but have little desire to run a collection shop for the reasons I've covered above, and the dozens that I haven't. Instead, many of these dealers chose to sell all or parts of their loan portfolio.


When you sell loans, you're not only reducing the need, expense, or liability of in-house collections; someone else has now assumed the role of "villain" when bad things happen. If the customer loses their job and can't make payments: not your problem. If the customer files bankruptcy; not your problem. If the vehicle breaks down or is totaled; you guessed it! Not. Your. Problem.

Ok, it's not exactly a fairy tale, but if you don't have to do so much tedious collection work on your portfolio, you can live happily ever after.

In fact, as soon as you have sold that debtors contract to a finance company, they cease being a debtor and are instantly transformed back into a customer. From a Prince to a Frog and back to Prince, it's like a fairy tale. Ok, it's not exactly a fairy tale, but if you don't have to do so much tedious collection work on your portfolio, you can live happily ever after.


Besides eliminating or reducing the need to run an in-house collection shop, there are many benefits to selling your loans, and I will be covering more of those in future posts.





Consultants: A Multipurpose Tool For Your Business

swissaremykinfeThere's an old joke that goes something like "If you're an educated professional and out of work, you're not unemployed, you're a consultant. There must be some truth behind this because I recently read an article on LinkedIn discussing the problems that can arise by filling gaps in your resume' claiming to be a self-employed instead of unemployed. This is why when I introduce myself as a consultant, people have actually shot me a sympathetic look and assured me not to worry and that I'd find something soon.

After much convincing, usually by producing a professionally printed business card with a real office number, not just my personal cell, and actually business (not Gmail) email address, I hear, "Okay, you are a consultant. What do you actually do?"

As much as I hate to admit it, it’s a fair question. Consulting sounds like the saying about how those who can do, and those who can’t teach. But this is far from true. Unlike most teaching jobs, a professional consultant's knowledge comes not only from a theoretical classroom education but real world business experience. They have either owned, run, or otherwise worked for successful companies and have a proven track record that can be easily checked out by a potential client.

On the surface, it can seem puzzling why a business wouldn’t just solve their own problems internally, or rely on their own ideas for growth or expanding their markets. Fortunately for me, and the mouths I have to feed, there are several good reasons why businesses should turn to a consulting firm for help.


They Need A Fresh Perspective

When you have problems in your personal life, especially when making tough decisions or choices that could impact your family, you often turn to trusted friends and relatives for their advice. There are times when your business should do this, too.

But this isn’t just any advice your getting.  Expert consultants have the advantage of working with a large number of companies so chances are they have dealt with your type of problem before and know what works and what doesn’t. That experience also places them in an excellent position to offer a fresh perspective on solving new challenges in your business and providing long-term advice and guidance.

Consultants can provide insight and a clear solution to a problem that you may be too close to see. Even if you already have an idea of how to solve the problem you’re facing, it’s a good idea to speak to a consultant to validate your thinking and get their professional opinion.


They Need Additional Horse Power

Companies don’t always have the time or manpower to focus specifically on problem-solving.  After all, you still have a business to run and your employees are already focused on the day-to-day operations. Often the do not possess the experience skill set to take on these types of problem-solving projects.  And many of these kinds of projects are one-offs and do not justify the hiring of full-time employees to handle. On your own, compiling an expert team with experience in your business can be a tough, expensive, and time-consuming challenge.

In instances such as these, consultants provide the best of both worlds. They are highly skilled people who serve as a kind of temporary employee to your company. Good consultants need little, if any, time to get aquatinted with your business and can hit the ground running, providing an immediate value add to your company.


They Need Specialized Skills

The most common reason that a business hires a consulting firm is to gain access to a specialized set of skills that does not exist within their organization. For example, if you hired the firm I work for, you’d get access to a group of experts who’s skill sets include portfolio management, operations, information technologies, securitizations, and compliance.

Let’s say you own a Buy-Here-Pay-Here auto dealership and you are concerned about potential compliance issues in your loan portfolio. Considering the repercussions you could be facing for compliance violations, that’s a legitimate concern. Chances are you don’t have anyone on your staff who is an expert on the federal and state statutes required to conduct a comprehensive compliance audit on your portfolio. If not then you’ll need to reach outside of your company to a firm that does.  A professional compliance consultant can not only identify any problems with your portfolio but can also provide guidance on federal and state statutes in loan servicing, loan origination, privacy laws and many other areas that pose a risk to your business.

For most companies, hiring a full-time employee who specializes in compliance doesn’t make sense. They would be too expensive, and not enough work to keep them busy. But thanks to consultants, you can bring in highly specialized talent as needed with none of the expense or commitments of hiring a full-time person.


They Need Someone To Be The Bad Guy

There are cases where companies faced with financial or operational problems are forced to do major restructuring. Or, in a worst-case scenario, to shut their doors entirely. In either of those cases, laying off employees is usually an unfortunate reality.

Should you find your business in a situation that requires restructuring, a consulting firm can evaluate your plan and make suggestions where needed. They can also evaluate your staff and help you determine what positions will be necessary to carry out your plan and who the best people are to fill those positions. When a restructuring plan has been made, they can help you present the plan to your staff and answer questions. Bringing in and outside firm shows your employees that you are serious about keeping the doors open and saving their jobs. That’s an excellent moral booster in a time where one may be greatly needed.

Laying off employees as part of a restructure or business closure is a tough chore and can expose you to potential lawsuits if not handled properly. It can also be a very emotional experience if you are close to your staff. Having a professional explain the situation void of personal relationships or office politics can make the process much easier for both parties.

Consultants can also be very instrumental should you be faced with having to shut down your business. In some cases, they can help find a buyer for your business or help you liquidate its assets.

I hesitated before including the last topic in this article as it is generally the job of a blogger to keep things informative but light and casual. Restructuring or closing a business is no fun to write or read about, and it’s even worse if it’s something you are currently experiencing. However, it’s a part of doing business, and if you do find yours in such a situation, a good consulting firm can still be a great asset is helping you to strategize a comeback, or help you recover as much money as possible from your remaining assets.

So as you can see, consultants are more than just teachers, they are doers. They’ll roll up their sleeves and jump in the trenches with clients if need be to ensure their success. If you think your business could benefit from the help of a consultant, please drop me an email and I’ll put you in touch with a professional consultant who is an expert in your industry.

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