The business model of the Tommy Takem is legal but unethical. The argument of the old lady Sally is not valid. Once the deal is struck then the customer is bound to make full payment as per the terms of the contract. The threat of the letter is not serious. He can actually proceed with the collections. When the deal was struck the lady signed a bill of sale, promissory note, and a security agreement. As such the lady cannot revoke these agreements. These are fully valid and enforceable in the court. The owner, Tommy Takem can take action against the women for not paying her dues.
The revenue model of Tommy Takem Electronics is called seller financing. It is a perfect legal model and operational in various regions.
A seller financed sale is when the seller also acts as a lender to the buyer. Seller financed sales tend to eliminate the third party transactions like that of the role of the lender. This is typically helpful for financing any type of asset. These types of sales have no preset lending criteria that is necessary to acquire loan as in the case of lending institutions. These deals provide favorable terms to the buyer and seller both. There are also chances of high risk for the seller. The IRS states a mandatory minimum rate of interest on such deals. The timing of interest is different depending upon the type of asset sold.
In this model the seller also plays the role of the lender. The seller does not give cash to the buyer but gives him enough time to credit to purchase the asset. They sign a promissory note which shows the terms of the contract. This is a recorded and well documented transcript that becomes enforceable in the law of court. The buyer now has to pay the loan over a period of time along with the interest. The loans are for short time period. This is because after few years the value of the asset increases and gains enough value or the financial situation of the buyer might improve. The seller’s point of view is that they get a...