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www.leasingnews.org Tuesday, April 2, 2002 Accurate, fair and unbiased
news for the equipment Leasing Industry Headlines---- Small
Ticket Leasing Pat Roberts —What GOLF Means Tranax Technologies ATM Expansion GE Capital/CLP Chicago Sympathy April Fool’s Edition Reaction EAEL/UAEL Las Vegas Conference ePlus Expands Presence Dancing Our Way—NY
Times The
List Will Be Up-Dated This Week Stories We Are Working Upon--- The Funding Tree/ Bancorp Group/ New Century
Bank/ PinnFund Leasing ###
Denotes Press Release __________________________________________________________- Small
Ticket Leasing Sterling
Bank Leasing is an active funding source for small ticket "app
only" deals. We'll
be at the ELA Funding Exhibit in Chicago later
this month. Contact
Bob Krause 212 575 2473 Robert
Krause Robert.Krause@sterlingbancorp.com ---- Name
= John Martella Address
= 368 Vets Hwy City
= Commack State
= NY Zip
code = 11725 Phone
= 631 858 5157 Fax
= 631 864 8215 Email
= jmartell@sovereignbank.com Comments
= I would like to offer my comments on small ticket funding relationship. Network
Capital Alliance is a division of Sovereign Bank. We
are very active in the portfolio funding segment and we do have a
one-off small ticket funding program for qualified lessors with vendor
programs or relationships. I have been involved with lessor funding
programs since 1976. Please
feel free to contact me if you like to hear my thoughts on the market
place and direction of the industry.
---- Leasecomm/
Microfinancial is a truly small ticket leasing company in the $1,000
to $10,000 range (we can go higher selectively). We do business in all
50 States, have an approved list for equipment types (office furniture is
definitely on it), and have numerous programs depending what you want
to accomplish. We take both personal guarantee and business-only
applications. We
best like deal flow on a program basis, and will buy small-ticket portfolios
up to $5 million. Even so, if you become LC-registered (required
to do business), you can be very successful with your one-off deal
flow, once
we match our buying parameters with yours. George
S. Imrey Leasecomm
Corporation, subsidiary of MicroFinancial,
Inc. (NYSE: MFI) 10
M Commerce Way Woburn,
MA 01801 800-515-5327
x.7006 fax
781-994-4715 --- . At LeaseNOW we have had a "bulk purchase"
program for many
years. When I first approached
several funding sources about doing bulk
purchase around 1995-96, I had very few people who were interested in
the concept. I have recently
visited several lenders and the situation
has completely changed. Most
of the funding sources are no longer interested in "one off"
business and there is a deep concern over approval/closing ratios.
Most of the major funding sources that are left do
not want to consider any third party relationships that don't bring them
at least $3MM per year in funded business. They are very focused on the costs of processing
business from a multitude of brokers and lessors and they are beginning
to get a clue as to how to price business on
the basis of the value that a third party originator brings to the relationship.
I believe that this will work to the benefit of some originators
but to the detriment of many others. In
my opinion, originators can expect to see requests for UNL reserve accounts
that will limit the amount of PV they are advanced. There will also
be more expected of the originator with respect to the ongoing management
of the portfolio. This will
not just be lip service but actual
assistance. As
an originator, if you want special consideration on a program or market
niche, you will have to be able to provide detailed information as
to how you will help your funding source mange that business. Originators
who add value to the overall process of originating and managing
business will receive preference over those who don't. I
have noticed a fundamental shift from a "volume" driven
mentality to an
"operationally" driven mentality. This attitudinal shift
will be very difficult
to handle for those who made no effort to understand the lender
from the operations point of view.
This shift, incidentally, always
occurs when volume is flat or down.
Many
of the lenders I have spoken to do not want to do small deals at $3,$4
or $5,000 any more. The reason,
they say, is that they do not make
any money at them. This answer
magnifies the problem that the originator
will go through in managing the change to an operational mentality. When
volume was king, these types of deal would get done without
regard to the cost of booking that type of business. They were the
equivalent of the "loss leader" in the retail business.
You did small
deals, hoped to break even or minimize your losses, and engineer a "relationship"
with a vendor because you were "accommodating" them. This
works fine while the tide is rising. When business begins to ebb, however,
you have to make money on every deal you do.
For
example, if you do a $5K deal for 48 months and it costs $6.00 per month
to send out the statement and process the check. This will eat up $288.00
of the profit in the deal. If a lender that is in good financial shape
has a cost of fund of 5.25% and they give the broker a "buy rate"
of 11.25%, they have a 600 basis point spread.
If the broker adds
10% commission the total yield is 18.25%. If you discount the payment stream (no advances
for simplicity sake) the total GP in the deal
is approximately $1150.00. The
broker will be paid $500 of than (10%).
That leaves $650.00 for the funder to process, book, bill and collect
the transaction. Above we
determined that the manual billing alone
would cost $288. This leaves $362.00. If the lender's IDC (initial direct cost) is
2.5% then that will eat up another $125.00 of the
deal. The lender has $237.00
left to pay for operations. All
of this
assumes that the transaction is perfect and a collector never has to
call or a collection letter never has to be sent. With more and more lenders
basing their pricing on ROE this transaction would have to be perfect
to barely meet a 15% ROE requirement that most lenders have. Many
lenders that cannot make the ROE requirements add fee income programs
that can sometimes be considered surreptitious at best. What
is the solution to this? Deal
sizes down to $5K are a benefit from the
marketing standpoint. I recently
proposed the following to a lender who
stated that they didn't make any money on small ticket deals. Since the
primary cost is in the billing, let's make ACH mandatory on any transaction
under $15K. If the customer
balks at ACH then the payment is
increased by 3.5% to offset the cost of manual billing. This one simple
action would undoubtedly solve the problem and bring the return for
the lender more in line with their requirements. A $175 bump to the lender
makes a big difference on a deal this size. If you offer this to your
lender and they are still reluctant then that would be an excellent sign
that you still have a hidden objection. Lastly,
remember that as third party originators, we have to be the creative
ones. The lenders that remain do not feel pressure to be creative. It's a supply/demand thing right now. Do not
approach the lender
until you have thought the program through and have outlined a solution
that produces a profit and mitigates risk.
If you can approach a
lender, strategically, there is an excellent chance that you will
walk away
with the program you wanted. Bob
Rodi President
LeaseNOW,
Inc. drlease@leasenow.com www.leasenow.com 1-800-321-LEAS
(5327)x 101 ---- Where I see the problem is in equating the
phrase "small ticket" with "application only". When I joined this industry in 1983, there was no such thing as "app-only"
to $100K and "credit scores" were almost unheard of.
Almost every deal we presented to a lender was packaged which
seems to have become a lost art. Sometimes an offering needed to be made more palatable for a lender so we offered
structuring, another lost art. During
my early years in this industry, I learned that the relationship between a broker and funding source is almost
sacrosanct; it was a privilege to be accepted by a funding source and charged with the fiduciary responsibility
the relationship brings. The expansion of funding sources ten years
or so ago all competing
for the same broker business changed all that, and the situation became
the tail wagging the dog. As
the situation has once again
reversed, what we are seeing today is the funding sources which remain
are slipping very comfortably
in the role they played in the 80s, calling the shots in this funding-source
controlled market, being purposely choosey as to what business they buy and
who they buy that business from.
To summarize, I do not see small ticket going
away, I see it changing, perhaps dramatically. To the lease broker, I impeach you not to be disheartened. Recognize
and accept what's going on. Keep
learning. Stay diligent. Get
creative. Be collaborative. Above all, and through it all, hold on to your
integrity. Jim
Fleming nationalbusinesscredit@yahoo.com ---- Dwight
Galloway, Republic Leasing of South Carolina We
are thrilled that the acquisition of our parent, RBMG, by NetBank
is now complete! For the first
time since 1994, Republic Leasing Company will not have to use securitization
to finance the portfolio because the Bank will provide a more reliable
and lower cost of funds. Having
known and worked with NetBank since its inception, we were not surprised
to learn that they want us to “continue doing business in the
same manner” as we have for 14 years. Our
business model will remain the same: provide lease brokers with a
consistent, reliable funding source that bases its decisions on the
lessee’s credit (not collateral) and holds and services all the
resulting small to lower middle market leases.
Because we do not use automated scoring, and because we want
to offer good rates for good credits, we will continue to require
efficiency in our broker relationships. We prize brokers of any size who know their
deals and who value their funding relationships enough to send applications
that meet our credit parameters.
Contrary to many funders (or former funders), we have no minimum
volume requirements, just minimum efficiency standards. Although
the lower cost of funds will allow Republic to better meet the needs
of broker-lessors with unique programs or market niches, our main
focus will remain the experienced broker, regardless of size, with
whom we can develop a mutual trust.
Whether its one deal a quarter or one deal per hour, we will
continue to require good approval and closing ratios.
Our present rate of applications is higher than at any time
in our history and in order to maintain good service to our efficient
brokers, we will continue the practice of eliminating the most inefficient. No
source contributes more than 4% of our volume.
We look to quality brokers and
not how much they send us, but what we approve and what they sign.
Barry Reitman
is an excellent example. His approval and sign rate is very high. We
are inundated with applications due to the demise of so many funding
sources. We
cannot give them the attention they are due as we don’t use credit
scoring or
any tricks, but look at each transaction as an individual application. With
our new cost of funds, we will expand from our $15,000 marketplace into
the $350,000 arena. What we
need now are marketing managers to help
us find the experienced broker that we can give our full attention
to, as our cost
of funds gives a better opportunity to establish professional relationships. We
want to look at every deal, understand it.
Our parent company does all their
business through third parties. They
understand our market place. I have
never been so thrilled in the leasing business since 1994. Charles Randall
and I are really looking forward to 2002 and the opportunities Netbank
has given to us. Dwight
Galloway (
Leasing News has invited Dwight Galloway to appear on “Meet the
Leasing News
Maker.” With Capitol
Hill at ELA, the NAELB Conference, and other activities,
this may not be for another two weeks, as Mr. Galloway will be
on the road.. Editor ) Pat
Roberts---What Golf Means Thumbs
up to Jerry Withrow who knows his golf! Thumbs
down to Bill Clark who isn't current on handicaps. And why on earth would I say I was a 40 if I wasn't? I love playing golf, I'm not slow, and I hate having a handicap
that high. An afterthought - do you know what golf stands
for? Gentlemen
Only - Ladies Forbidden. And
to Jerry Withrow: don't you
have a golf tournament kind of imitating that
sentiment? What was it called
again? LOL Pat
Roberts ( the one and only. editor ) ------ NEW
DIGS PROVIDE ELBOW ROOM FOR R&D ON ATMs Tranax
Technologies Inc., an ATM company, announced recently that it will begin
operating today in its new corporate headquarters in Fremont, CA.
The new
facility provides increased space for production, research and development
and logistics, as well as additional office space. Tranax, formerly Cross International, will be
moving into its third office in four years.
A company spokesperson says rapid growth made more space a necessity. "In
addition to an expanded headquarters facility, the new Nobel Drive building
provides us with enough space to substantially increase our production
capacity and to build a world-class logistics operation for both finished
goods and service parts," says Mike Sedrel, Tranax's director
of operations. Tranax Technologies Inc. has installed more
than 25,000 ATMs since
1998, according to a company news release. BANK
TECHNOLOGY NEWS WEEKLY BULLETIN GE
Capital/CLP Chicago Sympathy I
agree with the person who wrote the following about GE Capital in
Chicago "The
complainers are the same people that complained when they had over
200 staff
processing the business." Obviously
the new relationship is not like the "old days of CPLC"
but all of the
old members of the Portland team have been very helpful during the transition
and every person we have dealt with in Chicago has been very pleasant
and willing to help! We have suffered the same delays in the funding
process as everyone else but have been very up-front with our vendors
and customers about the situation and people will understand if they are
kept in the loop! Nothing
like this is easy but we are doing our best to help educate those
in Chicago
to make it easier for us and others in the future. Bob
Skibinski Taycor
Financial Bob
Skibinski bob@taycor.com You
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with the truth, accurate and unbiased, no axe to grind. You get it
here first, too. -------------------------------------------------------------------------------------------------- April
Fool’s Edition Reaction That
was fun! Susan
Carol -- Very
cute! David David G. Mayer Patton Boggs LLP 2001 Ross Avenue |