Automobile Lending Contract

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					Executive Summary




       This document contains
confidential and proprietary information
       belonging exclusively to
          Inofin Incorporated
                             EXECUTIVE SUMMARY



THE COMPANY                                                                                              2


THE CONCEPT                                                                                              3


THE BUSINESS                                                                                          4-8

         Market Overview                                                                                 4

         Dealer Participation                                                                            5

         Dealer Network and Criteria                                                                     6

         Risk Limitation                                                                                 7

         Customer Profile                                                                                8


THE HISTORY                                                                                          9-10




     This summary is not intended to address every aspect of the business of Inofin Incorporated the risks
associated with used automobile loans. Lending to Inofin Incorporated is not FDIC insured and assumes
 a level of risk that the lender acknowledges. Any questions related to this lending opportunity should be
                              addressed to Inofin Incorporated and its representatives.
THE COMPANY


Inofin Incorporated was organized as a domestic corporation on March 1,
1994, under Chapter 156B of the General Laws of the Commonwealth of
Massachusetts. It has established the corporate requisite and authority to
engage in consumer lending and finance, and holds in good standing a Lender’s
License as regulated by the Division of Banks and Loan Agencies in the states
the Company originates loans.

Since 1994, Inofin has originated and serviced over thirty thousand automobile
loans through over fifteen hundred dealer members in twelve states, primarily
throughout New England and along the Atlantic Coast. These states include
Massachusetts, Rhode Island, Connecticut, Maine, New Hampshire, Virginia,
West Virginia, North Carolina, South Carolina, Tennessee, Georgia and most
recently, Colorado.

Inofin Incorporated’s corporate offices are located in Rockland, Massachusetts,
situated halfway between Boston and Cape Cod. The company currently staffs
nearly fifty employees.
THE CONCEPT


Inofin Incorporated was formed for the specific purpose of capitalizing on a
unique opportunity that exists in Buy Here, Pay Here auto financing. In the used
automobile business, Buy Here, Pay Here is a method of financing automobile
loans where the dealer provides financing directly to his buyer. Typically, this
buyer does not meet the criteria for a traditional bank advance.

Inofin works through dealers on a selective basis, buying a portion of the cash
stream, at a discount, from the loan to the borrower. The remaining cash
stream is held in a reserve. Inofin then services that loan, collecting payments
from the customer, regaining the principal and retaining the interest. Only then
is the reserve forwarded to the dealer.

The loan carries an interest rate comparable to credit cards, and the terms are
short and consist of weekly payments. The borrower authorizes Inofin to
automatically withdraw (ACH) their weekly loan payment from their personal
bank account. This automatic payment method, along with the interest rate
and short term of the loan provides Inofin with the ability to minimize risk
position, recapture its capital expeditiously and further enhance its lending
activities.

An agreement obligates the dealer to re-purchase the loan in the event of a
breach of certain representations and warranties, including potential non-
payment by the customer. In other words, the dealer offers guarantees for
their borrower(s). This encourages the dealer to act selectively in their initial
qualifications, and to hold an interest in the collection of a loan.

Rather than outsourcing, Inofin services all of its loan originations with an in-
house collection division. Having an internal collection department allows the
company to maintain and monitor account activity on a daily basis to ensure a
positive loan performance is carried to maturity.
THE BUSINESS

Market Overview:

“Buy Here, Pay Here” lending originated to fill the demand for auto purchase
loans to credit blemished consumers who were otherwise denied by banks and
credit unions. This business of auto dealers granting modest loans to borrowers
came about in the 1970s and remained a localized market through the 1980s.

Sometime around 1990, many national automobile lending companies began
vying for this large and seemingly untapped market segment of poor credit auto
consumers. Barriers to entry were few and capital was readily available, which
led to a steady influx of new companies opening their doors for business. Soon,
the industry was inundated with Buy Here Pay Here dealerships- many supported
by lenders, backed by investors.

Certainly the industry was attractive, as it provided the opportunity of a high
return on investment while building on an under-serviced consumer segment.
Like any venture however, it was not without risk. The uniqueness of the
business presented challenges to inexperienced and over-anxious companies on
both sides of the desk. For auto dealers whose trade was selling cars, this new
task of maintaining and collecting on a massive loan portfolio was at times
overwhelming. For lenders, their industry was strictly loan administration and
they often found it difficult to adapt to the informalities and incidentals of the
car business.

While some untested ventures fell to failed collection methods and
competition, the stronger and savvy businesses thrived. Moreover, the big
picture was the demand had been discovered; the niche had been carved. There
was a large and growing segment to service.

Today, the market remains strong with more opportunity than ever before.
With a solid business model and access to capital, companies can prosper in
most any economic climate. For regardless of conditions, there exists a vast
segment of consumers with questionable credit histories. Blemishes on one’s
credit report tend to shadow a borrower long after their own economic
situation may have improved- seven to ten years or more in some cases.
Dealer Participation:

Generally, used car dealers lack the capital and resources to both operate their
businesses and carry their Buy Here, Pay Here loans effectively. It is important to
recognize that the dealer’s greatest skills are in buying and selling automobiles,
and not typically in financing and administering such transactions.

Inventory turnover is critical to success in the auto industry. The ability to
replace sold units and keep a fresh rotation of inventory is necessary to meet
customer demand. The Inofin program provides the dealer with a sufficient
cash advance to recoup his investment in the automobile, and thereby acquire
additional inventory without burdening his operating cash flow. This provides
not only the dealer, but also Inofin, additional inventory- as auto loans originate
from automobiles.

Dealers receive the advance amount on each vehicle when the loan is
contracted. This advance, along with the customer’s down payment, gives the
dealer an immediate profit on the sale of the vehicle. They then build larger
profits on each loan by deferring some of the income until the principal and
interest have been paid to Inofin. Payments collected thereafter are put into a
reserve account and forwarded monthly to the dealer. Inofin encourages
dealers to keep a substantial amount of money in their reserve account to
achieve long-term success using the program.

The dealer also provides Inofin with both personal and corporate guarantees.
Should there be a breach in contract, including but not limited to, non-payment
of the borrower, the dealer is required to re-purchase the loan contract. This is
where it is beneficial for the dealer to retain a substantial reserve balance and
avoid such an “out of pocket” loss expense. Consequently, to ensure his future
profits and prevent such expense, the dealer is eagerly motivated to aid with
any aspect of account maturity, including the collection of the loan payments.

The ability to re-deploy his capital towards the purchase of additional inventory
and the stability of future income through reserve payments are attractive
inducements for the dealer to allow Inofin to collect its portion of the loan
before he obtains full profit on the sale. Through this process the dealer is able
to rapidly turnover his inventory and free up his cash flow while developing a
continuous asset base of short-term loan receivables.
Dealer Network and Criteria:

Inofin’s dealer network plays a very important role in the overall business plan.
It is the dealer member that establishes contact with the consumer and initiates
sales contracts. Therefore, it is priority to maintain healthy relationships with
core dealer members as well as develop and cultivate new relationships for
consistent volume and future growth.

Inofin’s outside sales and business development team is active in sustaining a
strong presence in targeted territories, reviewing potential dealers and
examining their reputation and stability. Once a member, dealers are provided
with the tools and resources to succeed with the Inofin program. They will also
enjoy the benefits of an online quoting system and same day loan funding.

Dealer capability and credibility are essential factors in the selection process.
The following hard criteria are applied to prospective dealers to asses the
intention and ability to guarantee the loans that would be submitted for
funding:


   • The Dealer must be in business a minimum of two years

   • The Dealer must undergo a detailed credit analysis

   • The Dealer must have certain verifiable assets

   • The Dealer must produce verifiable business references

   • The Dealer must exhibit all applicable licenses in good standing

   • The Dealer must produce copies of various documentations including,
     but not limited to, current lease agreements and/or mortgage contracts
Risk Limitation:

As with any business enterprise, lending capital for the purchase of used
automobiles involves certain risks. Inofin’s lending model substantially
mitigates unfavorable scenarios by limiting risk position within the loan terms
themselves. In addition to those assurances, the following securities are
retained by Inofin Incorporated with respect to the contract and collateral:


   • Inofin holds physical Title to the automobile collateral.

   • Inofin is listed on this Title as the first lien holder.

   • Inofin retains 100% of the Right, Title and Interest of the contract and
     collateral.

   • Insurance coverage on the collateral is enforced throughout the loan
     duration.

   • Insurance policy lists Inofin as “Loss Payee” and “Right to Notification”
     if otherwise canceled or suspended.

   • Inofin is provided with corporate and personal guarantees of the total
     contract amount by the dealer.

   • Inofin advance to the dealer is based on the wholesale value of the
     automobile as listed in the most current NADA guide.

   • A down payment representing equity in the automobile is expressed in
     all contract sales.
Customer Profile:

The typical borrower is an individual in a low to medium-low income bracket,
primarily a tenant residing in a rented home or apartment. Employment levels
may vary from blue to white collar, though traditionally many are in the labor,
retail, restaurant and hospitality fields. Time of employment is commonly less
than 3 years.

Most live modestly within their means and many are parents of small children.
Owning an automobile is critical to meeting their employment obligations and
conducting daily activities and responsibilities. This consumer is highly
motivated to retain their automobile, and in turn, satisfying their weekly
payment obligation to do so.

The benefit to these consumers is two fold: they are approved for an auto loan,
and they have an opportunity to improve their credit score, as Inofin reports to
all three major credit bureaus on a monthly schedule. To this consumer who
has experienced financial difficulty and credit woes, this is not only a car loan,
but an opportunity build positive and current credit and to re-establish their
borrowing ability.

The individual is also generally a “payment buyer.” While the interest rate is
higher than would be offered to a prime borrower, this consumer is looking to
buy a payment plan consistent with their budget and income. The payment
amount takes priority over other lending-related variables and is often the
single most important factor in the ability to satisfy the note.

More recently, the effects of a changing economy and a decreased social stigma
surrounding bankruptcy and default has created a larger pool of these
consumers. Widespread housing foreclosures and debt consolidations are also
significant factors contributing to this increase. While it often takes years to
build a highly favored credit score, one can be spoiled in a matter of weeks. It is
estimated that roughly 15% of the population today currently scores below a
600 credit rating.

Traditional loan institutions are not so forgiving when it comes to poor credit
history, especially in times of economic caution. In fact, more recently many
lenders are tightening their qualifications and standards, and previously credit-
worthy individuals are slipping into this segment.
THE HISTORY


Inofin Incorporated was founded in March of 1994 by Michael Cuomo and
Kevin Mann, initially under the name First Investors Factoring. In 1996, the
name was changed to “Inofin”- a word created from the company tagline,
Innovative Financing Alternatives. In its first year of operation, Inofin originated
one hundred and sixteen loans. By the second year that number had increased
to seven hundred and sixty five loans. Inofin has grown steadily and
significantly since then, taking time to perfect its unique Buy Here Pay Here auto
loan program.

The company began by lending directly to dealers, who would in turn offer
loans to customers and collect on the notes themselves. The dealers would then
reimburse Inofin on their outstanding loans. If their customer failed to fulfill
the loan agreement, the dealer was liable for repossession and redemption.
Since the dealer was active in underwriting their loans, they benefited from
hassle-free lending capital, while still retaining the accountability of customer
selection.

In 1996, management upgraded many facets of the company, including the
establishment of in-house collections that would service the loans directly,
under the same roof as they are originated. This new department would be
supported by advanced software that housed and automated much of the
processes. The system accrued interest and fees, alerted defaults, produced
statements and monitored collection efficiency.

It was this early integration that catapulted the company’s hands-on operation
model of utilizing skilled personnel, technology and innovation as the footing
for success. Behind this vision, Inofin would soon set itself apart from industry
competitors.

Over the next few years, the company maintained steady growth while intently
focused on future prosperity. Projections were scaled back in 1998 while
management planned for future profitability and progression. With structure
comes strength, and the goal was to apply intelligent policy, procedure and
practices that would ensure consistency and ultimately long term success.
In 2000, Inofin developed and launched Intrack, an exclusive online network
that enabled dealer members to enter prospective customer data and receive a
response within minutes. Intrack would enforce all business parameters in loan
underwriting by managing the risk of each dealer’s portfolio and adjusting the
advances accordingly. This provided a near-instant turnaround time that
facilitated same day loan funding- a process that often takes days, even weeks,
by industry standards.

As anticipated, this advancement proved to widen the active dealer base
significantly. Dealers could now enter quotes after hours and on weekends,
when they tend to see the majority of their business. Approved deals were
electronically forwarded for funding, streamlining much of the loan processing
workflow. Loan contracts over the next four years increased from fourteen
hundred, to twenty-four hundred, to over thirty-two hundred in 2003.

Within that first decade, Inofin had grown to nearly fifty employees. The core
functions of loan processing, accounting and collections had expanded; and
administrative, legal and technology departments had been added to provide
further support. Sales teams were located throughout New England, actively
developing new relationships and servicing existing dealer members.

What began with a handful of employees and a folder full of loans in 1994 had
gradually evolved into a fully-staffed lending operation. This achievement can
be credited to the measured foresight of its founders, the proficiency of its
employees and the valued partnership with its dealer base. As of 2009, Inofin
has funded over thirty thousand loan contracts.

Today, Inofin continues to generate loan volume through over fifteen hundred
dealers across twelve states. Facilitating dealer success and profitability, and
maintaining superior collection rates- rates that far surpass industry standards-
remain two of Inofin’s greatest assets. It is this commitment to the customers,
both dealer and consumer, which has solidified Inofin as a benchmark lender in
the Buy Here Pay Here loan industry.




     This summary is not intended to address every aspect of the business of Inofin Incorporated the risks
associated with used automobile loans. Lending to Inofin Incorporated is not FDIC insured and assumes
 a level of risk that the lender acknowledges. Any questions related to this lending opportunity should be
                              addressed to Inofin Incorporated and its representatives.

				
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Description: Automobile Lending Contract document sample