Captive finance companies are wholly owned subsidiaries of retail or manufacturing firms that help customers with innovative financing solutions as opposed to purchase. Captive finance companies may be significantly profitable to the parent company.
The primary purpose of captive finance companies is to fund the products of the parent companies by essentially extending credit to their customers. This funding enables the parent companies to increase sales and customers can avoid the struggle with sourcing funds from outside lenders. Parent companies also benefit from the interest charged by the captive companies.
Advantages of Captive Finance
Captive finance companies do not provide the conventional cash loans, instead the finance provided is secured on assets and associated services. Therefore, they provide better terms to their parent companies due to the minimal risks involved in the funding. This allows the financing company to offer relatively better deals, which may include lower interest rates, bundled services and cash rebates.
Captive finance companies also offer easier financing solutions for damaged credit. This can help boost corporations that are ineligible to access loans from other financial institutions because of income or credit issues.
Not only does captive financing have more robust offerings than a traditional lender, but this method also has several different financing options. These may include:
- Hire Purchase
- Operating lease
- Finance lease
- Extended protection
- Service Contracts
- Pay as you use
Setting up a Captive
Our team at VIP Apps Consulting have planned and managed the end-to-end process of setting up a captive finance company. Using our DELIVER Methodology, we work with clients to build the business process landscape, establish the required business roles, and core tasks of setting up a captive finance business. We support clients operationally in the early stages of the business and technically by helping clients to select and implement the technology needed for the captive business. Our related services:
We understand how to plan and execute the setup of a captive finance division in a manner that contains and mitigates risk and is realistic and sensitive to timelines. We have planned and managed projects for start-ups and joint ventures holistically, working with our clients to design the business process, build a compliance framework, support a system selection, and execute the implementation through to booking the first contract.
Provision of end-to-end Project delivery using our own DELIVER methodology, a proven blend of the Waterfall and Agile approaches, solving the business user stories in a simple way with business insights, technical innovation, project discipline and governance. Our team consists of Project Managers, Business Analysts, Solution Architects and Implementation Consultants, with skills in multiple architectures. This allows us to work effectively with business and technology stakeholders to design, solution and deliver financial platform projects end to end.
When considering a new system, understanding the capabilities of a new application is key, we support clients through an RFI and RFP process to assess the fit of an application to your company needs. Working within an ecosystem of alliance partners, and understanding your business requirements and processes, helps to safeguard you from making a wrong choice and enables you to clearly demonstrate your decision and select a system that recognises a strong business advancement and ROI.
Business Process Management
Before investing in new technology solutions, we can support evaluation of your existing processes, to optimise and increase the value in your existing systems and build a stronger platform for future digital transformation
We can help you develop a Future Application Roadmap and Strategy to transition your business to a new ecosystem of best of breed applications.
Enterprise Architecture Services
Parent companies usually require a level of oversight of the captive, we support clients in designing the architecture roadmap for integration between the parent, new captive and third parties ensuring that all things are considered and planned accordingly.
If you would like to discuss support of captive finance projects with us please get in contact, we would love to speak to you.
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