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MFAA Prosper : Mortgage and Finance Brief 14
16 Mortgage & Finance brief news Equipment Finance MArk blAckshAw Owner, Quadrant Financial Solutions The biggest challenges in equipment finance are the economy, the banks’ credit decisions, and the turnaround times for those decisions. In the eq uipment fi na nce s ector, you r competitive edge comes down to how quickly you can get things done. You must deliver prompt, efficient and professional service. The recent economic climate has really tested customers’ willingness to purchase equipment. Interest rates are a lways very important to be competitive, but they aren’t the be-all and end-all. If your clients value their relationship with you, then you can overcome any interest rate and economic issues – so long as you are competitive. There is less and less expertise for equipment loans out in the banking world, so there are a lot of opportunities for brokers to fill that void and build those relationships. One of my biggest bugbears is that a lot of the common sense has disappeared from finance lenders. The banks have taken control of their equipment finance arms, so they’re applying a banking logic to what is essentially a finance company product. We need consistency. Gone are the days when a broker could gauge which lenders would have an appetite for certain loans. Now, you could complete one transaction and then get a different decision in a couple of months’ time. Consistent decisions are paramount. If we get that, we can cut down a lot of the time positioning the loans. It can come down to getting the right person at the right time. If you get someone who is a bit more pragmatic, who understands the asset class and the transaction, then it might go through more smoothly. If you have someone who i s more bank oriented, not from a finance field, it might be a more d raw n- out proces s. In 2012, we must be more proactive in the way we forge ongoing relationships with our clients. We build a strong understanding of their equipment requirements for the next 12 months and put the necessary limits or pre-approvals in place to cater for those needs. Equipment finance can be pretty spontaneous – you must be ready to get a deal. Unless you’re f ront of mi nd, you could be overlooked. Finance in Focus Our experts discuss the latest developments and opportunities in their sectors. Vehicle Finance holly berTsos Managing Director, Niche Finance The biggest issue for vehicle fi n ance brokers at the moment is maintaining accreditations based on minimum volu me requirement s, and the level of vehicle purchasing dropping due to the economic downturn. Many companies are cutting costs by downsizing vehicles or r educi ng thei r fleet size. I c an’t remember any time in the last five-to-six years where I have assisted so many clients with payout figures as I have in the last 18 months. Many clients are enquiring about restr uctur ing their fin ance facilities to ha ndle these tough times. However, this option ha s never been favour ed by lender s. There are always some perennial problems to deal with, as well. Start-up businesses that have a ver y limited trading histor y have always been difficult to assist, as they fall outside most vehicle lenders’ credit policies. These clients must be prepared to make a large deposit – anything from 10-40% – for their first vehicle finance facility to est ablish accou nt conduct with a lender a nd position the application f avou r ably. We also have to deal with car dealerships undercutting our pricing or offerings. To get around this, it helps to obtain a pre- appr ova l for your client before they go shopping. It also pays to learn some of the tricks the dealerships use for quoting, such as bumping up residual percentages to reduce r epay ment s, or st ating low interest rates when the end rate is actually ver y different. Eventually, there will be a shift in the economic downturn. Although, a lot of businesses are feeling it at the moment, they will upgrade their vehicles and fleets – so hang in there. Work closely with your referral sources, so you are ready when the shift does occur. Existing self-employed clients in your database are your biggest oppor tunities. If you’re a br oker who doesn’t ha ndle vehicle fi na nce or can’t obtain accreditation, work with a broker who is, so you can refer your client and obtain a cut of commission. Something is better than nothing. ••• A lot of the common sense has disappeared from finance lenders ... they’re applying a banking logic to what is essentially a finance company product. i can’t remember any time in the last five to six years where i have assisted so many clients with payout figures
Mortgage and Finance Brief 13
Mortgage and Finance Brief 15