feature / Leasing and equipment finance Building a foundation forbusiness Story / Emily McLean 34 / branching out
Leasing and equipment financing isn’t just about plant and vehicles; it can be the door to a client’s lending needs Brokers whose diversification strategy includes offering leasing and equipment financing frequently find they have a valuable, profitable and highly cost-effective string to their bow. Many have already latched on to the benefits, with nearly half of all respondents (49.5 per cent) to The Adviser’s 2011 readership survey revealing they had diversified into this area. Yarra Finance Director Manuel Manias, for example, says asset finance accounts for around 70 per cent of his business. “Unlike clients requiring home loans, clients with financing needs return several times a year – simply because their assets are the wealth generators in their business.” Vehicle and equipment suppliers are core clients, Mr Manias says. “Many are without their own finance arm so they end up sending deals directly to us simply because we [can] convert it faster than any other entity could.” Daley Finance Brokers’ Mick Ward is seeing a huge demand for this type of finance. “If I’m not writing for our clients, somebody else is, so it protects what I have and retains clients,” he says. Nuts aNd bolts Most leasing and equipment clients are selfemployed or small business owners. In fact, loans in this area cannot be written unless the client has an Australian Business Number (ABN) specifically for a small business or self-employed trader. Macquarie Leasing currently provides finance for several types of motor vehicle, including passenger cars, trucks and transport equipment as well as goods for manufacturing plants, farm machinery and medical equipment. Brokers writing this type of finance can boost their bottom line significantly, according to Macquarie Leasing’s executive director, Jon Moodie. “After the initial learning period, a broker can earn between $350 and $500 per hour for a standard [leasing and equipment] loan, assuming the whole process takes two hours.” Mr Ward agrees. “I can spend one and half hours on a deal in leasing finance which gives me $1,000, and I can then spend eight hours on a home loan and earn $1,500,” he says. “Every broker should be doing this type of lending.” Commission structures differ between financiers, although brokers will generally receive between two and four per cent of the amount financed on a deal by deal basis. Brokers can generally expect commission to be paid into their account on or very soon after settlement day. Not a dauNtiNg area Writing a leasing and equipment loan is not as straightforward as residential home financing, and according to Mr Manias, there are grey areas. “It’s a very detailed process with no one way of getting someone approved,” he says. “As it requires analysing a company’s accounts, you have to be experienced and ask the right questions.” Mr Ward, however, claims it is a misconception that these loans are trickier to write. The income verification process is similar to that used for a home loan while credit is assessed the good old-fashioned way – by a human being rather than by an online credit scoring system. Nevertheless, he advises brokers to undertake some sort of training in this area of lending. “Often, this type of lending is settled very quickly – particularly vehicle finance – so you need to know how it all works from the outset.” branching out / 35
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