How to settle complex asset finance loans

Sometimes, a client comes along with a unique asset financing request. They might have a specialised piece of equipment needing to be replaced or be seeking a custom outfitting for their store. The added complexity of such negotiations means that brokers are at risk of spending weeks finalising a loan.

Tim Egan, a broker with Mortgage Choice in Queensland, was recently presented with an urgent problem. Allure Concrete Solutions, a small business also based in Queensland, needed help funding a piece of specialised equipment.

The business could not operate without this equipment, was facing likely contract penalties, and – to add complexity – had only been operating as a company for four months.

Sounds tough? Tim was able to assist with getting the funds in his client’s account the next day.

The tricky problem – and a concrete solution

Thomas Kose, owner and director of Allure Concrete Solutions, works commercial concreting contracts with tight project deadlines.

“One day, Thomas came to me in a bit of a pickle,” recalls Tim. “His sole income-producing piece of equipment, a diamond-tipped concrete grinder worth $30,000, had broken down. The dealership told him the part he required was on backorder for six weeks.”

“Thomas rang me in a panic. The only option he had was to buy a new machine.”

The new machine would cost $30,000, but the alternative was shutting down until that part came in – and the penalties if he couldn’t start work the next day to meet his contract deadlines would be between $25,000 and $30,000.

“Long story short, he needed $30,000 to replace the machine in a day,” Tim says.

The key challenge for Tim was that Thomas had only operated Allure as a small business for four months.

“He didn’t have any kind of financial information for the company,” says Tim. “He had seven years of trading as a sole trader and just four months of trading as a company, and with no real financials.”

Tim says most banks wouldn’t even have looked at the scenario. He approached Prospa to secure a loan with a simple, fast application process.

“Prospa was happy if we provided a full year’s financials to show continuity of ownership as the sole director and owner,” says Tim. “We collected bank statements to show incoming transactions and had the money in his account within 24 hours.

“Thomas rang me on Tuesday morning,” says Tim. “We had approval that afternoon, and the money in the bank the next morning. He was back at work by lunchtime that day.”

The ease of a Prospa Small Business Loan

This was not the first time Tim has found himself fielding an unusual financing request from a client.

He’s helped a dentistry client fund a denture moulding machine, and a manufacturer of wash basins for hairdressers who needed a small, fast loan to buy raw materials to manufacture products for a sudden influx of orders.

These niche scenarios are perfect for a Prospa product, says Tim, owing to the simple application process.

“Where Prospa is really helpful is the many different ways you can prove income. They are willing to think outside the box when determining a business’ ability to service the loan,” Tim says.

“Prospa also encourages clients to pay off the loan quickly. Most banks will penalise them for paying out a loan early, while Prospa may actually reward them with an early payout discount.”

Best of all, the speedy timeframe on certain time-sensitive funding for assets can be a boost for both productivity and profit.

“Brokers are busy,” says Tim. “The quicker the time between taking an inquiry and settling a loan, the better. A home loan takes weeks of work to collect a similar commission that I received for 12 hours of work. If I could do these kinds of loans every day, that’d be perfect!”

Tim’s top tips for other brokers

Tim is quick to stress the ease with which he completed the client’s loan application with Prospa, but there are still things for brokers to remember when approaching loans for tricky asset verticals. Here are his top three tips:

• Collect the essentials from the client upfront. “We had a quick turnaround, but without that pressure, it’s still about collecting the information as early as possible. That’s not new to brokers – that’s pretty straightforward.”
• Sell the product’s benefits. “The early discount on a Prospa SBL is a big feature and a good thing for the consumer. Present it to the customer as a short-term cash flow management product. It’s not a loan so much as a quick cash injection.”
• Be transparent with the customer. Tim says that the higher cost of funds can be a hurdle for brokers in speaking with customers. “But it may be partly offset by the discount for early payout,” he says. Customers are also able to forecast with certainty, as regardless of interest rate changes, their loan costs are fixed.