Hire and Rental News

18 | HIRE

AND

RENTAL

NEWS

| MAY 2012

INDUSTRY IN FOCUS

By Miles Beamish from

Finlease (Proud members

of HRIA and EWPA)

There are three significant

issues here. Firstly, your bank

usually has more than just your

equipment debt because they

also provide property loans and

overdrafts etc and all of this

debt typically gets wrapped up

as a master security (via ‘cross

collateralisation’ clauses) so

you have houses cross securing

equipment and most clients

need to keep those bricks and

mortar assets clear to secure

‘non equipment’ debt.

Secondly, the more debt you

have with one bank, the more conditions

they will typically apply to your overall

debt. Conditions that wouldn’t be there

if you had your ‘equipment debt’ spread

across several other lenders. Machinery

finance should stand on its own feet and

not be linked to your property securities.

Finally, if you ever wanted to change

banks your outgoing bank would usually

insist you pay out any equipment finance

you had with them and that would incur

‘early termination’ penalties which would

not be there if the debt was elsewhere.

It is often better to have several great

relationships instead of one potentially bad

marriage!

Is it difficult to spread your equipment

finance across many lenders?

Not at all. Once your company is well

represented in a finance submission, it is

simply a matter of seeking expressions of

interest from two or three of the dozen

or so competitive, capable lenders in the

equipment finance market. As each year

rolls on, it is a simple matter of updating

that submission to fund any future growth.

A good broker will focus on long-term

relationships with their clients as repeat

business is the best for everyone. Encourage

clients to put in pre-approved lines of credit

so they have the finance well in advance

and it costs them nothing to have these

ready for use.

Small Matters – finance brokers vs banks

Small business is Australia’s largest employer and the backbone of the economy.

Why would a client use an equipment finance broker instead of their bank?

There are lots of reasons. A good broker will make it easy, look after them and make sure they get the right finance

on time and spread their equipment finance across a number of lenders so they don’t get tied up to just one bank

who has them by the proverbial. Why not have all of your debt with your bank?

Do they need someone like Finlease to do

that?

No, they can do it themselves, if they

have the time, know which lenders are best

for their requirements and have the

expertise to negotiate the right outcome.

The reality is many companies don’t have

the time and finance industry knowledge

to do this. The reason small business owners

keep using organisations such as ours is

they are busy running their businesses and

are happy to outsource this function.

What do you mean by negotiating the

right outcome?

Finance is an agreement between two

parties. The lenders offer terms and the

client decides whether or not they will ac-

cept those terms. The trick is to know when

the terms are fair - relative to what the

market is offering - or need to be slightly

adjusted. This may be as simple as the client

wanting a longer term or higher residual;

it may be a lender is insisting on a deposit

when others would approve 100% finance.

Often we find a client accepts terms from

their bank which are not as good as the

market is offering, because they simply are

not aware of the broader market offerings

and take the bank’s terms as gospel.

Is a broker cheaper than the banks?

We are typically the same on average

as the banks, but it’s not about saving $10

here or there, it’s about looking after the

client’s needs for the long haul.

If a client wanted to go

direct to market, are there

any tips?

Remember lenders are

human beings just like the

rest of us. They will read

a submission and form an

initial view; it’s called the law

of primacy. To put it another

way, you never get a second

chance to make a first im-

pression so a company must

ensure their submission

is well presented and places

their business in its best - but

accurate - light. Business

owners have already ‘

approved’ the equipment

in their own minds because

they will be the ones paying for it for

five years, so it’s just a case of getting the

‘why’ down on paper and in a way lenders

understand. It’s what we call ‘financier

speak’. Doing this well makes your company

attractive and lenders will compete for this

business, resulting in better outcomes.

What is one important piece of advice

you would give to business owners?

Change the way you think about finance.

Business owners need to see finance for

what it is; just another raw material and

service needed to run a business. It should

be accessed in the most flexible, useful form

with the least amount of constraints and

conditions and be competitively priced and

backed with good customer service. Unlike

many other raw materials or assets, the

brand of the money provider is somewhat

irrelevant; money or debt all looks the same

in a bank account or on a loan document.

Finlease is a specialist finance broker that

has grown 20 times in 20 years and has

nearly $1 billion worth of funds arranged

and in place for their predominantly small

to medium business clients. Financing all

manner of business and personal assets

from charter boats to cranes, aircraft to fit-

outs and all types of property. Finlease has

over 4,000 clients and branches throughout

Australia, serving as finance advocates.

For more contact 02 9959 3122 or visit: