More than 500 resellers have applied to dealer credit startup Moneytech as potential members in its proposed card system aimed at easing channel credit arrangements.
Hugh Evans, managing director at Moneytech, said resellers had shown keen interest in Moneytech's system, dubbed DealerCard.
“We have got more than 500 applications,” he said. “So we've got the interest to start working.”
He said the response was mainly from the low end of the market, but on average the applications were for $50,000 to $100,000 in credit.
“And that's a fair size,” Evans said.
Several news reports have suggested DealerCard may take advantage of resellers unable to get credit the usual way, and that DealerCard members could be stigmatised as a result.
Evans said that impression was probably based on a misunderstanding of the proposed system.
DealerCard would work the same way as current credit arrangements between dealers and distributors.
But, instead of applying for credit with each distributor, DealerCard-carrying resellers would only have to arrange credit once for all member distributors, he said.
The system would slash the metres of red tape involved each time a new reseller and distributor arrangement is created, Evans said.
“[Similar systems] work in other industries, such as pharmaceuticals, health care, the liquor industry and the building industry,” Evans said. “Anywhere there's a supply chain.”
DealerCard would be underwritten by Moneytech. Members would be subject to an 100-point credit check, just like that used by the banks, he said.
It wasn't in Moneytech's interest to offer credit to anyone who was a bad risk, Evans pointed out.
“But there's an obvious need for credit,” Evans said. “Traditionally, funding comes from distributors. However, there's a shortage of insurance.”
Distributors had always found it difficult to offer adequate credit facilities to resellers, partly because of standard insurers' demands on the IT sector, he claimed.
“We'll put in place credit limits that are high enough for resellers to run their businesses,” Evans said.
He said Moneytech would offer resellers either $100,000, $250,000 or over $250,000 credit limits. The card would include “true” 30-day interest free terms with an unsecured interest rate of 17.5 percent kicking in after that.
However, payments made within 60 days would only incur interest of around 8.75 percent. Secured customer rates were yet to be decided, Evans said.
“If you pay each one on time, you won't incur any extra charges. If you have to extend the payment period for some reason, you incur aggregate interest over that period of 8.75 percent for less than 60 days and 9.70 percent for 118 days,” he said.
Dealers would pay $250 a year to subscribe to DealerCard, Evans said.
Sonja Menezes, sales and marketing director at Moneytech, said DealerCard would give resellers more control over their finances and their businesses.
“They'll have more control over who they go to purchase from,” she said.
It would also help reduce risk for distributors. So far, about 15 distributors were keen to join the scheme, Menezes said.
News reports have linked Evans with failed distributor Siltek.
Evans helmed Siltek until about October 2000. Siltek – after racking up some $9 million in debts -- closed about a year later, in 2001. So it wasn't really fair to imply Siltek's failure was his responsibility, he said.
After Siltek, Evans “took a break”, re-entering the business world with Happen Business, where he worked until April 2003. Evans then took another break before setting up Moneytech in September 2003.
The DealerCard project had been 18 months in fruition but was expected to get going for real early 2005, Evans said.