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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   September 2005

Equipment Leasing as Lead Source

Partnering with vendors can increase business through referrals

Imagine developing a referral source that generates a steady stream of business for equipment leasing and commercial real estate mortgages. It’s a possible scenario that could give you an edge over your competition.

In an earlier Scotsman Guide article, I discussed how equipment leasing can be a considerable revenue center for commercial mortgage brokers. This month, I will focus on how it can also provide a significant boost to your commercial mortgage business through referrals.

One noteworthy fact about equipment leasing is that every transaction involves an equipment supplier. In most cases, this supplier is a vendor that sells equipment as its primary business. Equipment vendors sell new and/or used equipment to companies in need of equipment for a variety of reasons, including expanding operations and starting a new location.

There are many benefits to partnering with equipment vendors, including:

  • Earning income on funding equipment leases from vendor referrals. With a consistent deal flow, the vendor’s sales force becomes your sales force. Working with vendors also gives you the opportunity to acquire commercial mortgage leads.
  • Because the equipment need is often predicated by a company’s expansion or move, there is frequently an opportunity to provide the financing for the commercial real estate purchase it may be making.

Potential income from equipment-lease funding

By establishing an equipment-leasing business line, you can start to nurture and grow a vendor referral base that will generate steady profits for financing both equipment and real estate purchases.

How lucrative can equipment-vendor referrals become? If you have four vendors that each refer five applications a month to you, and if you fund one in three deals, you will generate an average commission of $14,000 per month based on an average transaction size of $40,000.

Best of all, your vendor will be satisfied with you and your service and will send you more applications the following month. Also, you will receive additional, ongoing business from your growing client base. Between a consistent vendor deal flow and an increasing client base that provides additional funding opportunities, the equipment-leasing book of business builds quickly.

Commercial real estate referrals

In this scenario of vendor referrals, if only one in seven equipment-leasing deals leads to a commercial mortgage, you will receive one potential commercial mortgage each month. Rather than paying to generate your leads, your marketing source is a profit center in its own right. Essentially, through networking with equipment vendors, you get paid to market commercial mortgages.

Of course, there are additional referral opportunities as your client and vendor base expands. Consider the domino effect of this example. Your client Tom is a business-owner who is buying a deep-fat fryer for his restaurant. A year after you help him with that deal, he calls you to help him finance the purchase of a space for a second restaurant on the other side of town. He also has to purchase more equipment.

Tom has a friend, Sue, who is opening a business in which she sells custom metal-working machines to welding shops. Sue starts referring her clients to you for help with financing the purchase of her equipment.

Sue’s friend and business consultant, Jeffrey, is heavily involved in the chamber of commerce in Sue’s hometown. Jeffrey is excited to learn that Sue has increased her revenue by 15 percent by offering a financing option to her clients. He talks to you and starts promoting your services to his other clients who sell business equipment as another way they can improve their revenue.

Over the next year, Jeffrey refers two clients who become strong vendors for your equipment-financing business. Some of these new clients who are purchasing new equipment are also preparing to significantly expand their businesses and require financing to purchase new facilities. You help them with several commercial loans.

Through the synergy of referrals, you start building a larger base of clients and vendors. Your vendors are thrilled with your ability to service their clients with your wide array of leasing programs. Those strong relationships further result in additional referrals and business in equipment financing and commercial lending.

•  •  •

Some leasing companies specialize in developing and nurturing long-term vendor relationships. If you partner with this type of leasing company, you will develop a relationship with a mentor that has a vested interest in teaching you what it knows about developing vendor business, which in turn can be used to increase your commercial mortgage business.


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