What do dentist chairs, multimillion-dollar yachts, earthmovers, commercial trucks, jet skis, passenger vehicles and even planes have in common? The Adviser discovers how they could all be money makers for brokers
You could be forgiven if you drew a blank to the question above and concluded the only thing they have in common is that they all cost money. But where an asset has a value – it can be financed.
Everything from planes to automobiles to medical equipment can be funded by asset finance. And brokers who think these items are beyond their scope of knowledge and a far cry from the homes they are accustomed to financing are missing the point, according to Liberty Financial’s national sales manager John Mohnacheff.
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“We’ve got to get it through our heads that the only differences in loans is the asset,” Mr Mohnacheff says. “So what are we actually selling? We’re selling money. You’re not selling a client a car. You’re not selling them a house. You’re not selling them plant and equipment. You’re selling them money.
“You fill in an application form for a home loan. Is that more complicated than filling out a car loan? No it’s not. In fact, a car loan can be done in one hour without even leaving your office. It’s all online, electronic. And it’s a great income for you – so you broaden your income base and you’re helping the customer.
“Same with plant and equipment. You fill in the application form, like any other application form. You send it to the lender. The lender approves it or declines it and sends it back you. It’s no different. In fact, it’s easier, it’s faster.”
The appeal of asset finance lies not just in its simplicity but also in its ability to help you “ring fence” your clients, says director of aggregation services at NLG Leasing Frank Crombie.
“Apart from the development of another revenue stream which is the obvious reason you’d add another service offering, I think it’s about offering more to your customers,” Mr Crombie says.
“So in a sense ring fencing them from your competitors because it is so highly competitive out there. If you don’t offer asset finance then you may very well be pushing your customer into the hands of another broker, or worse still, the bank. So it really has to be something you add to your suite as a service offering and then the bonus is that clearly there’s some additional revenue to be had as a result of that.”
Boarding: What can be funded?
It’s understandable that some brokers may struggle to get their heads around the scope of asset finance and what items can be funded, but the answer is akin to “how long is a piece of string?”, Mr Crombie says.
“The simplest way I could answer that is – if it’s got a serial number and it’s identifiable, then there is a high probability and likelihood that it is something that you would be able to finance in the asset and equipment space.”
“At the consumer end of things, we do everything from your cars and leisure goods like jet skis and boats and caravans and things like that. Then into the commercial space of trucks and trailers and work utes and concrete crushers and IT equipment and software.
“As you look around, it’s sort of limitless in terms of what you can do.”
Vow Financial’s head of commercial and leasing Glenn Mitchell says thanks to the construction boom in many cities in Australia, there are plenty of assets that need financing.
“Asset finance can apply to passenger vehicles and light commercials such as trucks and trailers. Plus, there’s things like earth-moving equipment,” Mr Mitchell says.
“Because of the construction boom at the moment, a lot of these companies are having to upgrade general plant and equipment and earth-moving equipment on a regular basis to meet the demands of the markets where they’re building quite profusely.”
Take off: How do you get started?
Getting started in asset finance is about utilising your two greatest assets as a broker, your ability to ask questions and your database, according to Mr Mohnacheff.
In many cases, asset finance clients are in your database waiting for help. They might just not be aware you can assist them.
“What’s the greatest asset that a mortgage broker has? Well it’s their database, right there in front of them,” Mr Mohnacheff explains.
He says brokers are in a unique position to understand the full scope of a borrowers’ needs due to their ability to ask questions and get honest answers.
“If we were just two people having a chat and I said to you, ‘Hey, how much have you got in your bank account please?’ You’re not going to tell me are you? ‘How many credit cards have you got? Where do you live? What’s your phone number? What’s your driver’s licence number?’ You’re going to sit there and say, ‘John, just back off!’
“However if I was a mortgage broker and I asked you these questions, you’d tell me everything wouldn’t you? How many cars you have, how many kids you’ve got, where you live… So individuals disclose everything that there is to know about themselves to a mortgage broker.”
Mr Mohnacheff says these conversations feed into asset finance – does the borrower own a business? Do they need a commercial vehicle? Perhaps they need a new car. Passenger vehicles are the easiest place for brokers new to the space to start, he says.
“Go through your database, have a look at how many people you’ve got on your database and then add up the amount of cars that you’ve got.
“The interesting thing is, in Australia, people on average turn their cars over every three to four years.”
He says if brokers ask the right questions while doing a borrower’s home loan, they might not sign them up to an asset finance product straightaway but they will discover potential future deals. These conversations give brokers a good excuse to stay in touch and remind clients of the full range of products and services they can offer.
Robert Veitch, senior manager at O’Maras, agrees and says breaking into asset finance can be as simple as paying attention to the people and the documents in front of you.
“Brokers might be dealing with SME clients. So in that case there may be assets listed on their balance sheet,” Mr Veitch says.
“If they’re individuals, there might be opportunities to finance their leisure equipment. Rather than going out and buying a boat outright, they might be better off looking into leasing it.”
Mr Veitch says brokers should also look to establish referral relationships with accountants.
Accountants are likely to be advising their business clients on whether to obtain asset finance or fund a business purchase via a capital injection. If asset finance is the answer, accountants would be looking for professionals to take care of the transaction, in which case brokers need to make sure people know they’re available to assist.
Landing: How does it work?
The systems and processes involved in getting an asset finance deal across the line are similar to completing a residential or commercial transaction, according to experts.
Mr Mohnacheff says it is a logical progression for brokers to move into this space and they simply need to follow their nose and take it step-by-step, as they would with a residential deal
“Asset finance is a very seamless and logical progression for brokers in assisting both consumers and business people. It’s about broadening your horizon.
“All the customer wants to do is buy a new car. They’re not going to baulk at filling in a form. You just answer the questions over the phone. You can do an electronic signature verification.
“So it can be that simple. There is no complexity to it. Look, if you’re buying big plant and equipment, then yes it’s a bit more involved. But once again it’s a process of following your nose. Here’s a form. Fill it in. Don’t lie on it. Don’t miss anything. Fill it all in and send it through.”
Mr Crombie says turnaround times is the main difference between asset finance deals and residential loans.
“Generally we would find that with most standard transactions, we’d have some sort of turnaround and answer within 24 hours,” he says. “If it’s a more complex structure and it’s of a larger size, then typically it might take a couple of days for credit to assess them and do their checks.”
An example of a larger, more complex transaction is an $850,000 “hole digger” which NLG Leasing recently settled on. Even with the added complexities, Mr Crombie says it only took a couple of days to process, “whereas with a commercial transaction, it might take weeks to months to sometimes even years”.
Mr Veitch says brokers have to do “very little” to get started in asset finance, and they just need to get in touch with lender BDMs to understand the process and work out if they need any further accreditations.
Mr Mitchell says even though some additional work may be necessary at the front end, aggregators and lenders are keen to offer brokers training and support to break into the asset finance space.
“Look, a lot of lenders at the moment do require separate accreditations. They are quite rigid in that regard because they don’t want their underwriters doing all the work so that’s an obligation back on us, the aggregator, to provide the correct training.
“A lot of the lending institutions are providing us with training this year so brokers can start to realise and understand the products that are there.”
If brokers are unclear about how they can become asset finance specialists or unsure about whether it’s worth the effort, Mr Mohnacheff says a key step in the process is shifting your mindset.
“Very importantly, going forward, there’s going to be disruption to brokers’ businesses. I have said for a long time that people who call themselves mortgage specialists – well, there’s no such thing.
“Home loans can be done online, can be done this way, that way and there’s going to be digital disruption coming into the marketplace. So just focussing on mortgages is very, very dangerous because if you just have one product with a customer, you’re not a trusted adviser, you’re transactional, you’ve just given them a home loan. And there’s only so many times that toy can transact over a home loan.”
Furthermore, if brokers start with financing vehicles, they are likely to capture a younger demographic, Mr Mohnacheff says.
“Helping people finance cars is an absolute pathway to picking up the next generation of borrowers, and what could be better than that?”
