Recently, BikeBiz happened to see a post from someone frustrated about access to Novuna Finance due to high turnover limits. We reached out to the Bicycle Association for their take on it, delving a little deeper into their scheme, working with Novuna to offer finance for UK bike shops.
Here, we talk to John Styles, Consumer Finance associate at the BA, to ask more about the scheme.
There is some noise on social media regarding high turnover requirements for Novuna Finance. Could you clarify the actual eligibility criteria for IBDs looking to access this specific scheme?
It’s £250,000 per annum for the store’s turnover (far below Novuna’s £2M standard criteria). We haven’t publicised that figure in the past, as occasionally people skim read and assume that might mean £250,000 on finance. Generally speaking, a store might turn over around 10% on finance, so a small store with £250k turnover might do £25,000 on finance (or let’s say 5 e-bikes) as a minimum. But of course, each store is different, and that figure will vary store by store.
The reason why some people may have been quoted a higher number is that they are “knocking on the front door“ at Novuna, which is a very large organisation with several automatic email gatekeeping systems. To avoid this, they simply need to visit the Bicycle Association website and hit the ‘sign up now’ button. This sends their details directly to the four or five people who support our industry scheme specifically.
We already have around 50 stores transacting, with over 4000 bikes already sold. Many of them are small businesses with only two or three employees. The scheme is aimed to be universally available, to as many stores as possible, in the sector.
If a retailer has previously approached a major finance provider independently and been turned down, might they find a different result by applying through the Bicycle Association?
Yes, they might find a different result by applying through the Bicycle Association – if their enquiry simply landed up in the wrong place, because of the wrong communication channel. There are other criteria to qualify, though, such as being profitable in your last financial year and having at least two years of accounts. So, if they were turned down at the underwriting stage, that might be a different outcome – a brand new business might need to return after 2 years’ accounts, for example. The full criteria to qualify for this scheme are, of course, on our website.
The topic of FCA licensing can be quite daunting for an independent retailer. Could you explain what the current requirements are for a shop to offer finance, and how this scheme helps both licensed and unlicensed stores navigate those rules?
I remember shopping for my first MTB back in the 90s, and it seemed back then almost every store offered 0% finance. However, FCA licensing has become an ever-increasing burden to small businesses like IBDS over the years (both in terms of cost and time). And it appears that many have given up because of this. (I’m still talking to hundreds of retailers but haven’t completed a full market survey just yet – but my current estimate is that less than half of all IBDs still retain an FCA license. Given that around 10% of all ‘high ticket’ goods use consumer finance, I fear that many stores, and the industry as a whole, have been quietly losing sales because of this.)
There are two ways IBDs can still offer finance without an FCA license, though. Firstly, stores can trade up to 12 months without a license. In practical terms, most providers will only offer 10 months in order to ensure the loan remains within the legal terms. Stores can start right away with Novuna and trade with 10-month terms offered to consumers. That’s easy.
If they find that Consumer Finance really works for them and want to start trading beyond 12 months, Novuna can help in one of two ways. Firstly, they can provide a list of compliance companies that also act as an Authorised Firm (also known as the Principal). The Authorised Firm can appoint retailers onto their FCA licence, allowing retailers to offer regulated credit; these retailers are known as AR’s (Appointed Representatives). The Authorised Firm (Principal) assumes responsibility for all regulated activities the AR performs. This includes ensuring the AR complies with FCA rules and operates within the scope of its appointment. There is generally a charge to become an AR of an Authorised Firm and a monthly fee thereafter. The second way is to use a compliance company to assist you in obtaining your own FCA licensing, and again, Novuna can help by providing details of various compliance companies.
When retailers are looking at their bottom line, any new service brings concerns about overheads. Are there costs or commitments involved for a shop to join and maintain this scheme?
There are no financial commitments, costs, overheads or administration fees to join the BA-Novuna finance scheme. It is entirely free of charge to sign up and begin trading. There can be costs associated with being an Appointed Representative or having your own FCA license, as mentioned above. But retailers should be in a stronger position to weigh up the balance between their revenue stream and those costs once already trading. In short, get started and see how it goes. Of course, for those already trading successfully with an FCA license, the process of switching to Novuna is even easier.
Does your scheme sit alongside a retailer’s existing systems? If so, what should they know about how it interacts with their current EPOS or E-commerce platforms?
Novuna is one of the biggest providers of Consumer Finance in the UK, with over 2000 employees. So it shouldn’t come as any surprise that they offer a very wide range of integrations and plug-ins. We’ve listed all of the compatible EPOS and ECOMM platforms on our website. And we are in the process of reaching out to the very small minority of providers who don’t yet work with Novuna.
From a practical perspective on the shop floor, how does the application process work for the consumer, and what features are included to help the retailer manage the sale smoothly?
Novuna have a very experienced retailer onboarding team who can walk the store staff through using either the Novuna standalone portal or how the system works via various integrations. They also add value by helping the retailer with training and guidelines to manage the sale smoothly. Relationship managers also guide retailers through several of Novuna’s unique features, which help retailers develop responsible lending whilst maximising the number of loans to support both bike (and add-on component/accessory) sales.
For a shop owner who might be worried about the ‘admin’ side of finance, can retailers access support and training during the onboarding process and beyond?
Absolutely, the Novuna team is there to support retailers, it’s at the heart of what they do and their UK support team, based in Leeds, are there to develop long-term relationships and support. Even analysing the types of products and loans that stores are offering and coming back with guided business advice. For example, Novuna have a system that flags where a consumer has the choice to pay back a loan quicker than the proposed terms. Meaning consumers are more in control, and retailers can offer an option that reduces their subsidy cost. (For example, a consumer might ask for 12-month terms, which costs the store 6.62%, but if they choose to accept 6-month terms, it costs just 4.42%)
The BA will be at COREbike this year. What would you say to a retailer who is on the fence about finance and is considering stopping by your stand for a chat?
Yes, the BA will be at COREbike this year with staff from all of our industry support programs. With BA-Novuna Finance, we will also have two team members from Novuna working alongside us. We will also have colleagues from the Market Data team showing the new/enhanced retailer portal and E-Bike Positive scheme, which aims to become the industry’s “quality mark” guiding consumers to safe/reputable products. Our team are also on hand to answer questions about Technical support and Policy work. Please just drop by with any questions, or make an appointment here; you are most welcome to bring any topic or query. You’ll find us in room S4.
