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Digital Directory
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AUGUST 2013



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Why Bring an Equipment Lease Broker to your Party? -
by Mary Redmond

When seeking financing for your customers, there are a number of options to consider when selecting a lease resource.

One option is to work with a lease broker. Brokers arrange equipment financing or leasing between a customer and a financial source such as a commercial bank, independent leasing company or a captive leasing company.

Brokers can be helpful especially if the customer has a challenging credit history. Brokers are paid in one of three ways.

  1. The customer pays the broker an initial fee to find an equipment financing source. Often a portion of the fee is paid at the time the customer retains the broker services. The balance of the broker fee is paid when the lease commences. At lease commencement, the fee balance may be paid by the customer or the lender.
  2. The leasing company pays the broker. The broker may receive 100% of their fee from the leasing company for placing the financing with the leasing company. The fee is paid at lease commencement. The fee is paid out of the lease proceeds. The customer is really paying the fee over the life of the lease. The broker fee is added into the total customer financing cost and will be financed over the life of the lease. The Customer's monthly payment includes the broker fee, equipment cost, bank interest costs and applicable leasing company fees.
  3. The equipment dealer pays the broker. The broker fee may be added to the leasing company equipment invoice. When the lease commences, the leasing company pays the broker and the equipment dealer. The fee is built into the total financing cost and the customer's lease payment includes the equipment cost, broker fee, taxes and interest charges. Sometimes the customer is made aware that the broker fee is included in the total finance charges. The dealer decides how much information the customer sees, however we recommend full disclosure.

Before selecting a broker, check out their payment history with other equipment dealers. Occasionally, an unprincipled broker will retain the full fee for their efforts to locate customer financing even if they never find the customer the needed money. And the customer is upset with all involved parties.

For companies with a strong credit history and good quality financial statements, the added cost of a broker fee is usually unnecessary. Strong credit worthy customer with someone on their staff, that can locate competitive equipment financing options, should negotiate directly with a bank or leasing company. When a "middle man" broker is added, finance costs increase.

RedmondMary A. Redmond provides highly specialized information for corporations, managers and dealers who negotiate and manage leases. With 28 years in the leasing industry, including 21 working for the largest leasing companies in the U.S., Mary knows leasing. You may reach Mary at 913-422-7775 or mary@reviewyourlease.com

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