During the past year, along with the entire financing-leasing industry, the independent equipment leasing broker has experienced deterioration in the demand for their services and the supply of capital to fund what transactions were available in the market. This period of change has been difficult for most in the industry and some will be unwilling or unable to transition through the economic cycle. However, for those who embrace the transition and are willing to change their personal business models, the future will offer an abundance of opportunities and the potential for increased personal incomes.
The broker has an important position in the supply chain. As an intermediary, the broker acts as a conduit to match customers’ leasing-financing needs with appropriate funding sources and appropriate products. During periods when credit is readily available to most businesses, this service is usually quite simple and hard-working individuals can maximize their incomes by being available to do much of the leg work and to ease the process for clients, the vendors and the funders. During times of change, uncertainty and transition, the successful broker is required to enhance the process by analyzing the needs of clients, suggesting in detail meaningful solutions, and by assisting funders through the credit process with a more in-depth understanding of the complete transaction. The broker must transition from a sales person and a processor to an advisor and consultative intermediary who offers powerful, value-added substance to all of the parties involved in the transaction. The broker, dealing in small- and lower middle-market ticket transactions must move beyond an application-only mentality and embrace a complete financial understanding of the transaction. Recommendations for approval must include rational, supported data which emphasize the strengths and full explanations to mitigate any of the weaknesses in the transaction.
As our industry transitions through the “New Economy,” the demand for capital equipment returns and funding sources emerge to fund stronger transactions; the lease broker who is well positioned, well informed and capable of acting in an advisory capacity will be in great demand. Much of the competition will be rightfully omitted from the market, old relationships will be disrupted, new products and criteria will need to be fully explained and clients will require knowledgeable individuals to assist in navigating a new financial landscape. The savvy equipment leasing broker will be fully engaged in the market and will have established relationships with multiple funders. The savvy broker will fully understand the equipment and its value to the client. The savvy broker will be able to analyze the current financial condition of the client and present a concise credit package with meaningful and supported recommendations. The savvy broker will be a business partner whose expertise adds essential value to every transaction. One size will not fit most transactions, but rather the broker will match lease structures to individual cash flow requirements. The structure of transactions will be of primary consideration along with the credit requirements. The savvy broker will therefore attract stronger credits and facilitate more complex transactions, which will assist in higher approval ratios, stronger funder relationships, more repetitive business and increased profitability.
I have witnessed many brokers who are embracing the changes which are upon us. Several are well-seasoned individuals who are using best practices from years past to solicit, package and close transactions. Many are claiming their successes are derived from a complete understanding of transactions. These brokers are diminishing their level of frustration because they understand the challenges of the funding source; they are working in concert with the funders to ensure current approvals will not become future portfolio liabilities. Most importantly, they are developing stronger, mutually beneficial relationships with multiple sources.
I have also witnessed individual brokers who are struggling to survive and are struggling to understand transactions beyond superficial application information. Unfortunately, many of these good people will be left behind as we transition through the business cycle.
Many brokers are reaching out. They are re-educating themselves. They are re-examining their strategies and using this transitional period to enhance their knowledge about all aspects of the financing/leasing business. They are learning basic credit underwriting skills, they are offering new financing products and structures and they are broadening their horizon with an eye toward the future rather than grasping for the past. I applaud these efforts and am confident that these individuals are becoming well positioned for the future.
With every new challenge comes new opportunity. The equipment leasing-financing broker who is improving their personal skills, is optimistically engaging themselves with new clients and new vendors, and new funders will benefit greatly from the “New Economy.” The equipment leasing-financing broker who is an advisor and a respected business partner will always be in great demand by clients, vendors and funders.