Branching Out - Resimac

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