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Before you apply for equipment leasing or financing you should understand the difference between brokers and direct lenders. Which one is better for you and how can you tell?


The main difference between the two is going to be the rate. A typical broker will be paid commission in which is added to the total interest rate where a direct lender does not add commission to the interest rate. Typical brokers in this industry get paid between 1% - 15% depending on several key variables such as financed amount. Although the 1% - 15% commission does not equate to 1% - 15% increase in your interest rate, know that dealing with a broker can be slightly more expensive than going direct. I mean brokers are a business right? They have to be profitable in order to stay in business.


So what are you paying for with a broker?


You are paying for the broker's service. When a broker deals with multiple lenders they typically know what is best based on time in business, equipment being financed and the term desired. Because they have multiple lenders you may actually get a very similar rate as if you were to go direct to a leasing company because they know where to find the best deal. Similarly, then knowing the best rate, they also know of alternative routes should a lender happen to decline your request. They are more likely to find you a solution than the direct lender.


So how can you tell they are a broker?


Easy, do your lease documents match their company name? This is the easiest way to tell. Of course, there are captive brokers where they may have a private label program but there a very few of them out there. Don’t get me wrong, brokers are not bad. It’s like buying a home. You trust that your mortgage broker knows more than you do and will get you the best deal possible based on your requests. Same with equipment leasing. Just make sure they are reputable!


Should you always use a broker?


It could be best to use one at first and then establish a relationship with your current lender in case you need anything else. Usually wherever you shop for equipment, they have the best lenders connected to them based on equipment and industry so I would start there!


Direct lenders are important for back office support. Once you have obtained your equipment lease, how well you establish a relationship with your lender is just as important as your local bank. Make sure to pay your bills on time and always disclose any changes to your business that is pertinent to your agreement. This will help when you need a question answered or possibly looking to lease more equipment from them.


Are you looking to offer equipment leasing to your business customers? Look no further than www.FaaStrak.com. Access multiple equipment leasing lenders and find out which ones are best fit for you, your business and your customers!