Abstract:
System and methods associated with a distributed financing model. The distributed financing model distributes financing responsibility and risk among members of a value chain to finance certain buyers of goods or services, including those who are unable to get financing through financial institutions in the traditional manner. As a result, customers are better able to buy goods or services, sellers are able to sell more, and manufacturers or service providers can produce more.

Description:
TECHNICAL FIELD 
       [0001]    The present disclosure relates to systems and methods associated with distributing financing and risk among members of a value chain. 
       BACKGROUND 
       [0002]    Large purchases, such as vehicle purchases, are often financed by a bank or other financial institution, which requires that buyers meet stringent credit requirements. During a credit crisis or credit market vagary, credit standards are increased making it difficult for dealers to help secure loans and leases for customers with incrementally lower credit scores. As such, sales to certain vehicle buyers are highly dependent on the credit market. 
       SUMMARY 
       [0003]    The various embodiments of the present disclosure overcome the shortcomings of traditional financing. These embodiments include systems and methods that are associated with a distributed financing model that is less dependent on the credit market. The distributed financing model distributes financing responsibility and risk among members of a value chain to finance buyers who are unable to get financing through financial institutions in the traditional manner. As a result, more buyers are able to purchase services and products (e.g., vehicles) and sellers have more sales. 
         [0004]    The distributed financing model is applicable in many contexts. As described in further detail below, the distributed financing model is in some embodiments used in conjunction with a traditional financing model, such as in connection with a typical dealer-buyer transaction. The distributed financing model can also be used in emerging markets where buyers are not often eligible for bank credit due to their lack of credit history. 
         [0005]    The distributed financing model is also advantageous for financing the purchase of built-to-order (BTO) vehicles and makes the associated value chain more efficient since the transaction is initiated before the vehicle is built. Another application of the distributed financing model is to the financing of electronic vehicles in order to be able to distribute the risk associated with the battery pack to the suppliers of the battery pack. 
         [0006]    By distributing the financing responsibility and risk associated with buyers that have lower credit, the distributed financing model creates opportunities for dealers to make additional sales from their stock or of BTO vehicles. As a result, manufacturers can experience increased production, and manufacturers and dealers can obtain expanded market share and increased brand loyalty. 
         [0007]    The foregoing has broadly outlined some of the aspects and features of the various embodiments, which should be construed to be merely illustrative of various potential applications. Other beneficial results can be obtained by applying the disclosed information in a different manner or by combining various aspects of the disclosed embodiments. Other aspects and a more comprehensive understanding may be obtained by referring to the detailed description of the exemplary embodiments taken in conjunction with the accompanying drawings, in addition to the scope defined by the claims. 
     
    
     
       DETAILED DESCRIPTION OF THE DRAWINGS 
         [0008]      FIG. 1  is a block diagram of a method for financing a buyer, according to an exemplary embodiment of the present disclosure. 
           [0009]      FIG. 2  is a schematic illustration of a first value chain, according to an exemplary embodiment of the present disclosure. 
           [0010]      FIG. 3  is a schematic illustration of a second value chain, according to an exemplary embodiment of the present disclosure. 
           [0011]      FIG. 4  is a schematic illustration of a system for optimizing financing according to a distributed financing model and for distributing payment shares, according to an exemplary embodiment of the present disclosure. 
       
    
    
     DETAILED DESCRIPTION 
       [0012]    As required, detailed embodiments are disclosed herein. It must be understood that the disclosed embodiments are merely exemplary of various and alternative forms. As used herein, the word “exemplary” is used expansively to refer to embodiments that serve as illustrations, specimens, models, or patterns. The figures are not necessarily to scale and some features may be exaggerated or minimized to show details of particular components. In other instances, well-known components, systems, materials, or methods that are know to those having ordinary skill in the art have not been described in detail in order to avoid obscuring the present disclosure. Therefore, specific structural and functional details disclosed herein are not to be interpreted as limiting, but merely as a basis for the claims and as a representative basis for teaching one skilled in the art. 
         [0013]    Although the systems and methods of the present disclosure are illustrated in the context of a process for financing the sale or lease of a vehicle, the systems and methods are similarly applicable to the sale and lease of other original equipment manufacturer (OEM) products, such as computers. The systems and methods can be used by different supply chains and value chains. As used herein, a “supply chain” or “value chain” refers to a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer. The participants in a supply chain or value chain that perform activities that add value to the product are hereinafter referred to as “stakeholders.” In an exemplary vehicle value chain, stakeholders include material suppliers, an OEM, and dealers. Alternative vehicle value chains can include alternative and/or additional stakeholders such as service providers or the employees of any of the suppliers, OEM, and dealers. 
         [0014]    According to an exemplary embodiment illustrated in  FIG. 1 , a method  10  for financing the purchase or lease of a vehicle includes a main financing option for buyers that are able to obtain credit through normal channels (e.g., banks and other financial institutions) and an auxiliary financing option for buyers who do not qualify for credit through normal channels. Models for implementing the main financing option and the auxiliary financing option are further described with reference to  FIGS. 2 and 3 . Each model is illustrated by product flow (lines directed upward) and money flow (lines directed downward) through a value chain over time t. 
         [0015]    In  FIG. 2 , product flow and money flow through a first value chain  20  are illustrated according to the main financing option. The participants in the first value chain  20  include a tier two supplier  30 , a tier one supplier  32 , an original equipment manufacturer (OEM)  34 , a dealer  36 , a bank  38  or credit institution, and a customer  40 . The suppliers  30 ,  32  represent two tiers of suppliers. In alternative embodiments, there are fewer or more tiers and multiple suppliers in each tier. The product flow is as follows. At a first product flow step  42 , the tier two supplier  30  provides parts and/or material to the tier one supplier  32 . At a second product flow step  44 , the tier one supplier  32  produces specialized parts and provides them to the OEM  34 . At a third product flow step  46 , the OEM  34  produces a product, such as a vehicle, and provides it to the dealer  36 . At a fourth product flow step  48 , the dealer  36  sells the vehicle to the customer  40 . 
         [0016]    Money flow associated with the main financing option illustrated in  FIG. 2  is as follows. At a first money flow step  52 , the tier one supplier  32  pays the tier two supplier  30  for the parts and/or material provided at the first product flow step  42 . At a second money flow step  54 , the OEM  34  pays the tier one supplier  32  for the specialized parts provided at the second product flow step  44 . At a third money flow step  56 , the dealer  36  pays the OEM  34  for the vehicle p4rovided at the third product flow step  46 . At a fourth money flow step  58 , the customer  40  obtains financing from the bank  38  and the bank  38  pays the OEM  38  for the vehicle provided to the customer  40  at the fourth product flow step  48 . At a series of fourth money flow steps  60   1 ,  60   2 ,  60   3 ,  60   4  . . .  60   N  the customer  40  makes payments to the bank  38  according to the financing terms. The product flow, money flow, and stakeholders can be altered without departing from the scope of the disclosure. For example, in alternative embodiments, the dealer  36  buys the vehicle and the bank  38  pays the dealer  36 . 
         [0017]      FIG. 3  shows product flow and money flow through a second value chain  70  over time according to the auxiliary financing option. The participants in the second value chain  70  include the tier two supplier  30 , the tier one supplier  32 , the OEM  34 , the dealer  36 , a processing company  72 , and the customer  40 . The processing company  72  coordinates evaluation of creditworthiness, issuing of financing, collection of monthly payments, and distribution of monthly receipts to the stakeholders  30 ,  32 ,  34 ,  36 . Although the functions of the exemplary processing company  72  are described herein with respect to a single entity, in some embodiments, the functions of the processing company  72  are performed by two or more entities. 
         [0018]    The product flow associated with the auxiliary financing option includes the same steps  42 ,  44 ,  46 ,  48  as the product flow associated with the main financing option shown in  FIG. 2 . The tier two supplier  30  provides parts and/or material to the tier one supplier  32 , the tier one supplier  32  produces specialized parts and provides them to the OEM  34 , the OEM  34  produces a vehicle and provides it to the dealer  36 , and the dealer  36  sells the vehicle to the customer  40 . 
         [0019]    Money flow associated with the auxiliary financing option is as follows. The customer  40  obtains financing from the processing company  72  and, according to a series of first money flow steps  74   1 ,  74   2 ,  74   3 ,  74   4 ,  74   N , the customer makes payments to the processing company  72  according to the terms of a financing agreement. According to a series of second money flow steps  76 , the processing company  72  makes a payment M 36  to the dealer  36 , a payment M 34  to the OEM  34 , a payment M 32  to the tier one supplier  32 , and a payment M 30  to the tier two supplier  30  according to a distribution agreement. 
         [0020]    According to some embodiments, the financing option is not identified prior to producing or purchasing a vehicle. In these situations, a dealer is allowed a certain percentage of sales using the auxiliary financing option. To account for sales through the auxiliary financing option, payments at money flow steps  52 ,  54  for the main financing option can be reduced by the percentage. As an example, according to an agreement between the stakeholders  30 ,  32 ,  34 ,  36 ,  40 , each dealer orders vehicles and is allowed to sell up to 10% of the vehicles using the auxiliary financing option. The suppliers  30 ,  32  are paid for 90% of the cost of the vehicles at money flow steps  52 ,  54  to account for vehicles that are financed through the main financing option. The other 10% is left unpaid until later when payment shares M are received through money steps  76 . Where the dealer does not sell the full 10% of the vehicle order using the auxiliary financing option, additional delayed payments are made to the suppliers  30 ,  32  at money flow steps  52 ,  54  to reconcile the difference. 
         [0021]    In other embodiments, the dealer specifies the vehicles to be financed with the auxiliary financing option at the time of order. One such application is with respect to build-to-order (BTO) vehicles. As an example, the dealer is allowed to specify up to a certain percentage of their orders to be financed with the auxiliary financing option. 
         [0022]    Referring to  FIGS. 1-3 , the method  10  of financing a vehicle buyer is now described in further detail. At a purchase step  110 , the customer  40  initiates a lease or purchase of the vehicle supplied at the third product flow step  46 . At a main financing step  112 , the bank  38  determines whether the customer  40  is approved for the main financing option (e.g., acceptable credit score). If the customer  40  is approved, at an approval step  114 , the dealer  36  completes the sale or lease with financing through the bank  38 . Approval step  114  initiates the fourth product flow step  48  in which the vehicle is transferred to the customer  40  and the money flow steps  56 ,  60  in which the bank  38  pays the OEM  34  for the vehicle and the customer  40  makes payments to the bank  38  according to a financing agreement. 
         [0023]    If the bank  38  determines that a customer is not approved at main financing step  112 , the processing company  72 , at an auxiliary financing step  116 , determines whether the customer  40  is approved for the auxiliary financing option. If not, the method  10  is terminated at step  118  without completing the sale or lease. If the processing company  72  determines that the customer  40  is approved at the auxiliary financing step  116 , the dealer  36  at an approval step  120 , completes the sale or lease with financing through the processing company  72 . Approval step  120  initiates the fourth product flow step  48 , in which the vehicle is transferred to the customer  40 , the money flow steps  74 ,  76 , in which the customer  40  makes payments to the processing company  72  according to a financing agreement and the processing company  72  makes payments to the dealer  36 , the OEM  34 , the tier one supplier  32 , and the tier two supplier  30  according to a distribution agreement. 
         [0024]    After the sale or lease is completed in the approval step  120 , the processing company, at a verification step  122 , determines whether the customer has made a scheduled payment corresponding to the money flow step  74  of  FIG. 3 . If yes, at a distribution step  124 , the processing company  72  apportions payment shares M to stakeholders  30 ,  32 ,  34 ,  36  according to the distribution agreement at the associated money flow step  76  and the method  10  returns to verification step  122  for the next money flow step  74 . The processing company  72  may keep a portion of the payment to cover costs. 
         [0025]      FIG. 4  shows a system  200 , such as one or more servers including a processor  202 , a memory  203 , and software modules stored in the memory  203 . The software modules include instructions that, when executed by the processor  202 , perform the steps of the method  10 . For example, in some embodiments, the system  200  includes a receiving software module  204  configured by including instructions to receive indication that a customer payment has been made at a money flow step  76 . The receiving software module  204  is further configured to receive parameters of the payment, such as the amount and timing of the payment, and to verify whether the payment meets preset guidelines, such as guidelines of the financing agreement. The receiving software module  204  is further configured to store or initiate storing of payment information associated with the payment, such as the indication of payment, the amount, the timing, whether the amount is appropriate, and whether the timing was appropriate. The receiving software module  204  may store or initiate storage of the payment info in the receiving software module  204 , another part of the memory  203 , or in a memory separate from the memory  203 . The payment info is stored in an account associated with the customer. In some embodiments, the system  200  includes a distributing software module  206  configured to transfer payment shares M to accounts associated with the stakeholders. Though functions of the system  200  are described as occurring in three software modules, the functions of the system  200  may be performed by one or more software modules. For example, a combined module may perform tasks of two or more modules and the functions of any two or more modules may be performed in a single module. 
         [0026]    In the event that the receiving software module  204  determines that a customer has not made a schedule payment at a money flow step  74 , the processing company  72 , at a step  126 , determines whether to initiate a repossession process. The decision may be based on the appropriateness of the payment or the appropriateness of the timing. An exemplary repossession process includes a step  128  of physically repossessing the vehicle, a step  130  of selling the vehicle at auction, and a step  132  of distributing the auction proceeds to the stakeholders  30 ,  32 ,  34 ,  36 , such as according to agreements regarding distributing auction proceeds. The agreements for distributing auction proceeds may be a part of or separate from the distribution agreement for distributing customer payments. 
         [0027]    The system  200  may include software modules and computer readable instructions for performing one or more of the steps of the methods described herein and illustrated in  FIGS. 1 and 3 . For example, one or more software modules can be configured to perform steps  112 ,  116 . 
         [0028]    The financing agreement and distribution agreement for distributing monthly customer payments are associated with the auxiliary financing option are now described in further detail, and with reference to equations (1), (2) and (3) below. At the initiation of financing, the customer provides a down payment and monthly payments C of principal and interest are scheduled for amortization of the balance P according to terms of the financing agreement, including a customer interest rate i c . An exemplary calculation of the monthly payments C is given by 
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         [0000]    where n is the number of payments to be made according to the amoritization. 
         [0029]    Each payment C is then divided into payment shares M and distributed to the stakeholders by the processing company  72 , according to the corresponding money flow step  76 . An exemplary algorithm to determine monthly payment shares M to stakeholders  30 ,  32 ,  34 ,  36  is given as: 
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         [0000]    where n is the number of monthly payments to be made by customer, P is the value of the vehicle or balance of the sales price, j is a stakeholder index, R j  is a risk tier for a stakeholder, i j  is an interest rate for a stakeholder, and V j  is the fraction of the vehicle&#39;s total value or sales price P attributed to a stakeholder. 
         [0030]    The risk tiers R j  are classes of stakeholders with facing similar amounts of risk. Major sources of a stakeholder&#39;s risk are the length of time the stakeholder may need to wait for payment, and the amount of control over outcomes (such as authority to determine how many vehicles are eligible for auxiliary financing, which vehicles are built and which are eligible for auxiliary financing, which customers to offer auxiliary financing, and pricing incentives). Stakeholders with higher risk can be compensated with higher stakeholder interest rates. Higher risk tiers R j  include stakeholders confronting more risk and lower risk tiers R j  include stakeholders confronting less risk. A stakeholder in a higher risk tier may be given a higher interest rate than a stakeholder in a lower risk tier. According to exemplary embodiment, the distributing software module  206  is configured to determine payment shares. 
         [0031]    The fraction V j  of the vehicle&#39;s value P is a percentage of sales price of the vehicle. For example, for a vehicle that sells for $20,000, with dealer  36  costs and margin of $3,000, OEM  34  structural costs (e.g. Advertising, Manufacturing, Engineering, etc.) of $5000, OEM  34  variable costs (e.g. Freight, Warranty, etc.) of $1000, supplier  30 ,  32  material costs (all suppliers) of $10,000, and OEM  34  profit of $1000, the OEM  34  fraction V is 35%, the dealer  36  fraction V is 15%, and the supplier  30 ,  32  fraction V is 50%. 
         [0032]    The financing agreement and the distribution agreement are related and the parameters in the agreements can be optimized as desired by the processing company  72  and the stakeholders. The monthly customer payment C can be determined as the sum of the monthly payment shares M given by 
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         [0000]    As such, the customer interest rate i c  is related to the stakeholder interest rates i j . In some embodiments, the stakeholder interest rates i j  are optimized using a net present value (NPV) analysis so that each stakeholder&#39;s NPV is the same as in the main financing option to identify a set of minimum stakeholder interest rates. Alternatively, stakeholders may accept lower interest rates if plant utilization is low, or require higher interest rates if plant utilization is high. The minimum stakeholder interest rates are then used to calculate the minimum required customer interest rate. The processing company determines the actual customer interest based on this minimum, the customer&#39;s creditworthiness, the amount of the customer&#39;s down payment, and the interest rate offered by the main financing option for more creditworthy customers. The customer interest rate, the number of payments, the down payment, and the purchase price determine the resulting monthly customer payment C. 
         [0033]    The agreement for distributing auction proceeds upon default according to steps  126 ,  128 ,  130 ,  132  is now further described. In some embodiments, default shares are distributed as fractions of the proceeds from auction or recovered value. Alternatively or additionally, in some embodiments, default shares can be distributed according to seniority or a hierarchy. For example, only after the highest seniority stakeholder has recovered its risk capital is the next highest seniority level considered for a share of the recovered value. Default shares may be proportionally different than the fractions V of the vehicles value P and seniority is not necessarily proportional to default share size. For example, a smallest stakeholder can be assigned the highest seniority, a second smallest stakeholder can be assigned the second highest seniority, etc. 
         [0034]    Referring again to  FIG. 4 , according to some embodiment of the present disclosure, the system  200  further includes an analysis software module  210  that is configured to optimize input and output parameters. The analysis software module  210  queries which parameters are output parameters and queries values for key input parameters. The parameters include stakeholder interest rates payment shares M, monthly payment C, customer interest rate i c , transaction price P, dealer costs and margin, dealer floorplan and incentives, time in dealer inventory, OEM variable costs (e.g. labor), OEM fixed costs, OEM material costs to suppliers, number of suppliers, supplier share of material cost, and period or number of customer payments n. The analysis software module  210  determines, for each stakeholder, output parameters including the nominal price of goods sold per vehicle, material cost per vehicle, labor cost per vehicle, the ratio of structural to variable costs, and the risk tier. 
         [0035]    The analysis software module  210  is configured to optimize the parameters according to one or more of the following methods: optimizing customer interest rate i c  so that the OEM does not make a profit; optimizing customer interest rate i c  so that the stakeholders experience the same NPV as that of the main financing option; and optimizing the customer interest rate i c  such that the stakeholders realize a higher NPV than that of the main financing option. 
         [0036]    The above-described embodiments merely illustrate implementations that are set forth for a clear understanding of principles. Variations, modifications, and combinations of the above-described embodiments may be made without departing from the scope of the claims. All such variations, modifications, and combinations are included herein by the scope of this disclosure and the following claims.