Private sales are quite common from an industry to industry basis. Examples include bus company to bus company, haulier to haulier and machinery to machinery. These types of proposals are looked at on a case by case basis. Key issues include verifying the supplier through the CRO, Vat registration details and standing within their respective industry. The Caveat Emptor principle applies. Asset finance lenders may be cautious or unwilling to deal with private suppliers (i.e., individuals or non-established businesses) for several reasons, primarily due to risk management, asset verification, and compliance concerns. Here is why:
- Lack of Trust or Credibility Private suppliers may not have a track record of selling high-value assets like vehicles, machinery, or equipment. Funders prefer to work with established dealers or vendors who are recognised, reputable, and experienced in selling specific asset types.
- Asset Verification Issues With private sales, it can be harder for funders to verify: The ownership of the asset (ensuring it isn’t stolen or under a lien). The condition and valuation of the asset. Whether the asset meets safety, legal, or compliance standards. Dealers often provide warranties, certifications, and service history, which funders rely on to reduce risk.
- Risk of Fraud Private suppliers may present a higher risk of fraud, including: Misrepresentation: The supplier might provide inaccurate or misleading information about the asset. Non-existent Assets: In rare cases, scammers attempt to sell non-existent or stolen assets.
- No Recourse or Support If something goes wrong (e.g., the asset is defective, stolen, or has undisclosed issues), funders have limited recourse with private suppliers. Established dealers are typically subject to consumer protection laws and have obligations to resolve disputes.
- Compliance with Regulations Funders must adhere to strict anti-money laundering (AML) and know-your-customer (KYC) regulations. Private sales may present challenges in verifying the legitimacy of the supplier, increasing the funder’s compliance burden and risk of regulatory breaches.
- Absence of Dealer Partnerships Many asset finance providers rely on dealer partnerships to generate business and manage risk. Dealers often offer financing options as part of the sales process, providing a pipeline of secure, pre-vetted transactions for funders.
Limited Asset Support Dealers may offer after-sales services such as:
- Warranty coverage.
- Maintenance agreements.
- Asset inspections.
Private suppliers rarely provide these services, increasing the risk to the lender in case of asset failure.
Exceptions: in some cases, lenders may still accept private suppliers if:
- The asset is independently verified through an appraisal or valuation by a trusted third party.
- The applicant has strong creditworthiness and is willing to provide a larger deposit.
- The lender has existing policies for certain private sales (e.g., specific types of second-hand transport or industrial equipment).