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1.0 Executive Summary
Auto Loan Company, LLC (“the Company”) is a Rehoboth Beach, Delaware business that will provide automotive loans among most credit qualities for people throughout the United States. The business, as an additional revenue stream, will also work with companies that are acquiring large fleets of vehicles. At this time, the Company is seeking $15 million to establish its operations and provide vehicle loans. The Founder of the business is Patrick Landers, who will serve as the CEO of the business.
1.1 The Services
As stated above, Auto Loan Company will provide a wide range of affordable financing solutions for people purchasing both new and used vehicles. The business, through its location in Delaware, will be able to provide loans on a nationwide basis. The business will implement state-of-the-art technology that determines the credit worthiness of the borrower. The business will offer term loans ranging from 36 months to 60 months. The average interest rate will be 9%.
One of the major components of the Company’s growth will come from larger scale loans that are designed for companies that need to acquire numerous vehicles to add to their fleet.
In most cases, the loans offered by the business will be divested into the secondary market for a significant premium. The operations of Auto Loan Company will be further discussed in the third section of this document.
1.2 Financing
Auto Loan Company, LLC is seeking $15 million via private investment to commence lending operations. The funds will be primarily used for the following:
• Automotive loan portfolio
• Professional fees and licensure (among all continental US states)
• General working capital
• Initial marketing
Given the substantial revenues that will be generated from lending operations, the Company could easily secure additional investment or obtain warehouse lines of credit to further finance automotive loans.
1.3 Mission Statement
Auto Loan Company’s mission is to provide cost effective financial solutions for people and companies that want to acquire vehicles.
1.4 Management Team
The Company’s CEO is Patrick Landers. He has more than two decades of experience in the automotive financing industry. He will be able to bring the operations of the business to profitability while ensuring compliance with all state and federal lending laws.
1.5 Sales Forecasts
1.6 Expansion Plan
During the course of the first three years of operation, the Company will make ongoing investment into its lending portfolio. The business may solicit additional capital in order to further expand its lending capabilities. Finally, Auto Loan Company, LLC may acquire existing lending institutions that can be integrated into the Company’s ecosystem
2.0 Company and Financing Summary
2.1 Registered Name and Corporate Structure
Auto Loan Company, LLC. The business is registered as a limited liability company in the State of Delaware.
2.2 Required Funds
The Company will need a $15 million investment in order to commence lending operations. This funding will be allocated as follows:
2.3 Management and Investor Equity
This will be determined during negotiation. A preliminary terms sheet is available.
2.4 Exit Strategy
Most likely, the business would be sold (in its entirety) to a third party financial institution that wants to expand its operations. Additionally, based on the size of the business over the next ten years, the Company could conduct an initial public offering in order to secure additional capital for lending purposes. In either event, the Company will work with a financial services focused M&A firm or investment bank to manage the sale.
3.0 Auto Loan Services
As discussed in the executive summary, Auto Loan Company will provide credit solutions for people that have moderate to excellent credit. The business will not provide financing to people that have substantial credit issues or a past bankruptcy within the last seven years. The interest rate range for the Company’s loans will range from 8% to 11%. These rates will fluctuate based on the prevailing prime interest rate.
The Company will implement numerous underwriting protocols that will ensure that the business keeps its default rates to an absolute minimum. The software will compare the credit quality of the borrower and income to actuarial tables in order to determine credit worthiness. For corporate clients, extensive documentation will be required as well as personal guarantees of the Owners for all large-scale fleet loans.
Once a loan has been closed, the business will sell the loan into the secondary market. The business will generally receive a sales premium of 2% to 3% of the face value of the loan. The business will retain a portion of its credit portfolio in order to generate income through interest fees.
4.0 Strategic and Market Analysis
4.1 Economic Outlook
Automotive lending businesses are subject to numerous external factors that can impact their profitability. Rapid fluctuations in the prime rate can impact the value of lending portfolios. To remedy these risks, the Company will use forwards and swaps in order to ensure that upward and downward movements in the credit markets do not impact the overall value of Auto Loan Company’s portfolio.
At this time, the current economic climate is positive. Interest rates are declining as is the overall rate of inflation. As interest rates decline, Management anticipates that the demand for loans will increase as the monthly fees will become more affordable. Unemployment rates have continued to remain very low, which will further contribute to the stability and expansion of the business.
4.2 Industry Analysis
There are 4,000 companies that exclusively provide automotive loans. This figure does not include banks that provide loans are part of their overall operations. These enterprises generate $150 billion of revenue while providing employment for 90,000 people.
The industry will continue to undergo numerous changes over the next five years. The internet has now allowed people to receive loan quotes from numerous sources. Additionally, lenders can provide capital across the entirety of the country through electronic transactions. AI is expected to more precisely determine credit risk. The business will integrate these systems into its operations through the life of the Company.
4.3 Customer Profile
Any person that has reasonably good to excellent credit and needs to finance a vehicle purchase is a potential client of Auto Loan Company. Generally speaking, the Company will focus on people that have incomes in excess of $75,000. The business will not be bound by any geographic location.
As it relates to fleet financing operations, the Company will focus on car rental agencies, livery services, taxi companies, and non-emergency medical transportation businesses. These entities will typically have revenues in excess of $1 million per annum.
4.4 Competition
As there are over 9,000 entities that provide loans to the general public, it is difficult to determine the ongoing competition that Auto Loan Company, LLC will face. The business will maintain a competitive advantage given its low cost infrastructure, which will allow for competitive pricing of interest rates on all vehicle loans. Additionally, the use of financial instruments that protect the overall value of the Company’s portfolio will allow to the business to remain more economically stable that other competitors in the market. Using this strategy will allow the business to divest receivables at a profit at any time.
5.0 Marketing Plan
The competition among financing firms and financial institutions to provide automotive loans to credit worthy borrowers is immense given the profits that can be achieved through these operations. The Company will heavily focus on providing financing through numerous online channels throughout the country.
5.1 Marketing Objectives
• Maintain ongoing relationships with finance departments among numerous vehicle dealerships.
• Use social media marketing, SEO, and search engine marketing to create online awareness for the business.
• Foster ongoing relationships with third party financial institutions for the divestiture of loans as well as potentially acquiring new capital to expand the operations of Auto Loan Company, LLC
5.2 Marketing Strategies
Foremost, Auto Loan Company will leverage numerous forms of online marketing and advertising to ensure that the business receives a massive influx of applications for their vehicle financing needs. The Company’s platform will feature secure technology that will allow individuals to complete credit applications online. This website will undergo substantial search engine optimization so that when keywords regarding vehicle financing are completed – the platform will appear in the body of the search. It will take six to eighteen months for this type of marketing to become fully effective. Approximately 50% of the aggregate marketing budget will be allocated towards these purposes.
The Company will aggressively use social media marketing with a focus on targeted advertising. Among all major social media platforms (Facebook, Instagram, LinkedIn, and X), the Company will showcase ads among people that have recently expressed an interest in buying a new car. On LinkedIn, the business will focus its ads among people that list their professional as a procurement manager for a company that maintains a fleet.
In regards to B2B operations, the Company will maintain strong relationships with financial institutions that will acquire receivables. This is an important aspect of the Company’s operations as it will allow for a continuous influx of capital as loans are closed. These entities will also assist Auto Loan Company with its financial instruments that will hedge changes in interest rates and defaults.
6.0 Organizational Plan and Personnel Summary
6.1 Corporate Organization
6.2 Payroll
7.0 Financial Plan
7.1 Underlying Assumptions
• Auto Loan Company will acquire $15 million to develop its operations.
• The business will achieve a compounded annual growth rate of 15% during the first three years of operation.
7.2 Sensitivity Analysis
The Company’s revenues can be impacted by negative changes in the economy. As interest rates fluctuate, the demand for new automotive loans may experience volatility. During times of economic recession, the business may see increases in default rates. However, the business will remedy these risks through swaps. The Company will have controllable operating costs, which will further ensure profitability.
7.3 Source of Funds
7.4 Profit and Loss Statement
7.6 Cash Flow Analysis
7.6 Balance Sheet
7.8 Breakeven Analysis
7.9 Business Ratios
