Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.
Update: I was talking to my parents, they will go to the bank today. I hope this will work out, don't want to give up on this opportunity.
That was a technique that worked a while back when they were dishing out credit cards to everyone. Now with the new credit act, you have to list all your other debts and cards and they won't provide you with the credit card if you can't repay its full repayment along with the others from your monthly after expense income. Not too many of us can afford the monthly repayments on a R450k credit card bill.
What are they putting up as collateral? Life savings? Home? Please be super careful with this. If it goes wrong and they need this money, they're on the street.
If its a single item you're importing, can that not act as some of the collateral? Or is this item not easily resold by the bank if they had to?
Yeah I agree putting your parents life savings into one big deal is maybe not where you want to go. At least get someone with relevant business experience to cast a beady eye over your plan. It's not always easy to see the pitfalls when your heavily involved in, or too close to something. A fresh pair of eyes and some unbiased viewpoints are always a good thing.
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I appreciate your worries about my parents but the deal is very safe. There is total loss insurance, deposit paid by the customer... and if anything supernatural should happen and the item explodes I could still cover the installments. I am not a youngster in business anymore either, I do have a lot of experience with international trading, however, 450k is still beyond my financing capabilities.
And the amount is also not so much that it would give my parents a headache, I probably should have done that in the first place. But you know, often you just wanna do things without mum and dad's help ;-)
I am 32 already, 10 years business experience, but you obviously never get too old to ask your parents for assistance.
Regarding the collateral, I was actually thinking the bank would use the imported item as collateral, the market value is about 550-600k, is not very difficult to sell, especially for 450k, but they say they don't use the financed good as its own surety. Totally not understandable for me but that's what they say.
It is simply because of the fact that they do not know who the equipment belongs to. So using the equipment as collateral may have a problem that the ownership is not yours until certain conditions are met, which would put the bank at risk in the case of a non repayment of the loan. Secondly, the bank deals in money, not trading in goods. IN the case the deal goes sour, it now makes the bank responsible for getting it's own money back.
w
hat we tend to forget is that the bank trades in money as it's stock.
Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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Ownership is mine because I have to pay upfront, however, it is true that they are trading with money. On the other hand, it would be my responsibility to get them their money by either keep on paying the installments and/or finding another buyer for the good, which is not more difficult than selling a car or anything worth 450k.
Since the buyer has paid a 10% deposit and finance is in place and approved by his bank, what intention would he have to cancel the deal and lose his deposit? The worst thing that could happen is that the buyer dies before the good is delivered. But then I still have the deposit AND the good, AND I am able to settle the installments.
Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
Solar pumping, Solar Geyser & Solar Security lighting solutions - www.microsolve.co.za
Then perhaps you should be treating your clients in similar manner?
That said, I do understand there's a difference in payment terms (or the lack of it) when it comes to importing. But ultimately your potential client would face the same hurdle, surely.
EDIT: I see you've made a plan. Not ideal, but as long as it all works out...
Sounds like you've done as much as you can to mitigate risk though.
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I made sure the risks are reduced to a minimum. It will all show hopefully today if it will work out. In business you have to take risks sometimes. As long as you don't ignore that and make sure about things it will all be good. My father has been in international trading his whole life, if he weren't sure it's all planned properly he wouldn't get involved.
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