|First a point of clarification.
A Broker is someone who sources applications for lenders they are affiliated with and is your direct link into applying and securing financing from the lenders the broker represents.
An Equipment Financing Specialist is also a broker, but prequalifies your deal with you to determine only the RELEVANT lenders you should apply to “if any”.
That’s right, sometimes after a detailed review, a financing specialist will determine that you’re application as you have outlined it is unlikely to get financed and will further outline what you need to do to increase the likelihood of getting financing.
They may even tell you they can’t help you and won’t waste your time submitting applications with very low probability of success in terms of the lenders they represent.
Believe me, this level of honesty is what you need to be looking for. If a particular broker can’t help you, then they shouldn’t waste your time. It doesn’t necessarily mean you can’t secure financing, but it does mean you’re going to have to look elsewhere for more RELEVANT sources of equipment financing.
An Equipment Leasing Specialist is a knowledgeable professional with enough business ethics to give you solid feedback regarding your application, good or bad, including the best way to proceed. Many “brokers” on the other had will say just about anything to get your application submitted and get you somehow approved so they can get paid. They work on volume and as such are more concerned about finding deals to submit than trying to get you equipment financing you will be satisfied with.
So as you can probably already tell, I strongly recommend using an equipment leasing specialist when seeking business financing.
Let’s get back to the “Pros and Cons” of using a third party resource to locate and secure equipment financing for your business.
From the Pro’s side, a third party brokering source has greater access to the market than you do as an individual due to the fact that many lenders will only source applications through their broker networks. You may not be able to find a RELEVANT lender without going through a broker network.
Good Brokers (equipment financing specialists) are worth their weight in gold (well, almost) as they are in tune with the market and can direct you to more (here’s that word again) RELEVANT lenders than you would likely be able to identify yourself.
They will also be invaluable in helping you put together a solid application package and will proactively follow up with the lender clarify any unusual items and quickly answer any questions that may arise.
Even after getting an approval, good brokers will help you with the administration process that is required to actually complete the deal, which can be more difficult that you think if you aren’t going through this process every day.
Ok, but what about the Cons?
Well, we have already touched on some of them. Many brokers are pure salesmen that are trying to push as many applications through their networks as possible. There can be some real concerns with this type of practice.
First, as we have already talked about, the broker could be flooding your credit report with unnecessary inquiries and possibly crossing paths with other brokers you have also spoken with.
Second, equipment lease brokers tend to have volume targets with their lenders, so they could end up pushing you into a suboptimal deal just to get credit for lending volume with a lender that’s threatening to cut them off.
Many brokers do not perform sufficient prequalifying to properly understand your financing scenario so that it can be packaged and routed to RELEVANT LENDERS for optimal results. Instead, the broker uses sales tactics to get you to apply as fast as possible, promising levels of performance and results that are unrealistic. But to the business owner looking for financing, this can sound very appealing: I don’t have to give you much information and I will get financed right away!
For very straight forward deals, this can indeed be the case. But in many cases, you just end up with a bunch of declines due to lack of detail and explanation. Not only did you just waste your time and get a number of unnecessary credit inquiries that will potentially lower your score and put doubt in the next lenders mind, but the lenders that declined you may have been able to give you financing if the process was more complete the first time around.
Too late now.
Once declined, its nearly impossible to go back to a lender with the same deal properly presented and get anywhere.
The qualifying process with an equipment financing specialist can take anywhere from 5 minutes to half an hour, depending on the complexity of the deal. This is time well spent in the long run as I have seen it proven out time and again.
There may be some additional time spent packaging the deal, but if that’s the best approach, it’s worth the effort.
For straight forward deals, financing approvals can be secured within a few hours. For more complex applications, it will likely take a few days. Again, this is where an equipment leasing specialist can be the difference between success and failure. Presenting your application properly and making sure the lender thoroughly understands the financing dynamics before making a decision cannot be underestimated.
Ok, so how do you select a financing specialist to work with?
Take a look at the public information a broker makes available to you.
Do they focus on educating you on how they work and the process they will be following or are they full of sales lingo and hyped up promises that make the process sound too easy.
Is their approach based on education and support, or are they just in a hurry to get you any type of commitment that may earn them commission?
Do they require you to review your situation in detail before an application is submitted or are they ready to move forward on your behalf with partial information or an incomplete picture?
These are some of the more common things to watch out for.
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