BizLoanConsultants.com presents...

Business Loan Brokering 101 - The #1 Business Loan Brokering Start-Up Guide

By Buzz Glover

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BizLoanConsultants.com presents… Business Loan Brokering 101 - The #1 Business Loan Brokering Start-Up Guide

Copyright © 2016 by Buzz GloverNo part of this publication may be reproduced by any mechanical, photographic, or electronic process, or in any form of recording, nor may it be stored in a retrieval system, transmitted, or otherwise copied for public or private use without prior written permission from the publisher.

Violations of this copyright will be enforced.

DisclaimerThis information is distributed with the understanding that

the author and publisher are not engaged in rendering legal, accounting or other professional advice. If legal

advice or other expert assistance is required, the services of a competent professional should be sought. Also note

that this information in no way guarantees any specific amount of money to be made and the author cannot be

held responsible for any actions that you may take. The

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information shared in this training system is the result of

my experience in the business loan/lease brokering business. This represents my best knowledge of workable

methods.

There is no way to guarantee that the information will apply to your particular type of application. However, the

information that follows does have a proven track record and is supplied to provide you with guidance. It is the

user’s sole responsibility to determine the applicability of the material to his or her own use, and the author and

publisher assume no responsibility for situations which may arise from the user’s application of this material to his

or her own business.

The business owner is solely responsible for determining compliance with any and all local, state, and federal laws,

regulations and/or codes. The author assumes no responsibility or liability for any injury and/or damage to

persons and/or property arising from the implementation of materials contained in this publication.

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EARNINGS DISCLAIMER: We don't believe in get rich programs - only in hard work, adding value and serving others. Our programs are intended to help you find businesses who need financing and match them with funding sources who have interest in their needs. As stipulated by law, we can not and do not make any guarantees about your ability to get specific results or earn any money with our ideas, information, tools or strategies. When you hear us use the word Guarantee in the context of results we are referring to our Refund Policy/Money Back Guarantee as stated on our website or, if applicable, in our product specific sales material. We don't know you and, besides, your results in life are up to you. Agreed? We just want to help by giving great content, direction and strategies that move you forward in the loan brokering business. Nothing in this book or any of our websites is a promise or guarantee of specific results or future earnings, and we do not offer any legal, medical, tax or other professional advice. Any financial numbers referenced here, or on any of our sites, are simply estimates or projections, and should not be considered exact, actual or as a promise of potential earnings - all numbers are illustrative only. In fact, while we feel strongly about what we teach, the average person who purchases this and other programs never puts the work into implementing the strategies taught and therefore achieves little to no results. It's all the regular legal mumbo jumbo but we feel transparency is important and we hold ourselves (and you) to a high standard of integrity. We appreciate your business and your continued support!

UNLIKE RESIDENTIAL MORTGAGE BROKERING, MOST STATES DO NOT HAVE ANY LICENSING REQUIREMENTS FOR BROKERING COMMERCIAL BUSINESS LOANS OR EQUIPMENT LEASES AS OF THE WRITING OF THIS BOOK, HOWEVER WE DO NOT HAVE A COMPREHENSIVE LIST FOR ANY STATES THAT MIGHT HAVE A LICENSING REQUIREMENT FOR THIS TYPE OF BUSINESS. PLEASE CHECK YOUR INDIVIDUAL STATES REQUIREMENTS IN THIS AREA TO MAKE SURE YOU ARE IN ACCORDANCE WITH STATE LAWS.

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Dedication

To those who want to live their dreams, not the dreams of others.

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Business Loan Brokering 101 Table of Contents:

Page

Part One - Introduction 8CH 1 My Story 11CH 2 About this Book 14CH 3 Why I Wrote This Book 15CH 4 Goals of this Book 16CH 5 Daily Life of a Business Loan Broker 18Part Two - Getting Started 19CH 6 Your Start-Up Budget 20CH 7 Setting Up Your Office/Business For Success 22Part Three - Overview of The Business 34CH 8 Two Primary Markets 35CH 9 Breaking the Business Down Into It’s Simplest Form 36Part Four - Marketing - Finding Or “Originating” Deals To Broker 38CH 10 Calling on the end-users vs. the “annuity” approach 39CH 11 Strategic Relationships You Should Focus On 40CH 12 Other Types of Marketing You Can Do. 47CH 13 Setting Marketing Goals 48CH 14 A Simple 7-Touch Marketing Strategy 49Part Five -What Is The Process When You Find A Deal 52CH 15 How a Deal Usually Gets Started 53Part Six - An In Depth Look at Finding andDealing With Funding Sources 94CH 16 How to Find Good Funding Sources 95CH 17 Keeping A Good Database for Your Funding Sources 95CH 18 Sources to Find Funding Sources 96CH 19 How To Approach Funding Sources 101CH 20 Other Types Of Funding Sources 104

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CH 21 Funding Source Approvals 105Part Seven - Financial Aspects of Business 107CH 22 Remember “NO EXPERIENCE NECESSARY” 108CH 23 Using a HP17BII calculator or other calculator. 109CH 24 Calculating Rate Factors on HP17BII 122CH 25 Understanding Time Value of Money (TVM) 123CH 26 Using TValue Software as a Tool 124CH 27 Reading Financials 125CH 28 Credit Package Checklists 130CH 29 Differences Between Loans and Leases 132CH 30 Marketing Advertising Budget 137CH 31 Benefits of Equipment Leasing 139CH 32 Pricing Your Deals 141CH 33 Prepayment Penalties 147CH 34 Cash Vs. Lease Vs. Loan Analysis 148CH 35 Just a quick note about FASB and GAAP 148Part Eight - Documentation 150CH 36 “He Who Has The Gold Makes The Rules” 151Bonus One - Big Ticket Equipment Finance Transactions The Big Leagues Of Equipment Finance 159Bonus TwoWhat You Should Do If You Have Bad Credit 166Appendix A - Equipment Finance Profile 170Appendix B - Commercial Real Estate Finance Profile 172Appendix C - Credit Application 174

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PART ONE

INTRODUCTION

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Chapter 1 - My Story

I have been an entrepreneur for the majority of my professional life. I have owned businesses that include: sign making business, printing business, two business loan brokerages, mobile sign business, three car washes, car wash consulting, and for a very short stint, a self storage business. My latest venture is this book, my second book (my first book helped aspiring car wash owners get started in the business). As you can see, I have an entrepreneurial spirit that just keeps on ticking. I also worked in the corporate world for a little less than half of my professional life. For those of you who are not entrepreneurs, I can tell you sincerely and honestly that working for yourself is much better than working for someone else. The regular paychecks are great in the corporate world, but in my opinion, that is the only benefit the corporate world has to offer. When I see my neighbors, who seem to have good jobs, worry about lay-offs, losing their jobs, fighting with their bosses, getting up for work every day 5 days a week at the same time each day and putting in 40+ hours a week,

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I know it would be hard for me to ever go back to the corporate world. As an entrepreneur you control your time, your money, and your success. Before owning my first business, I thought that business owners had some magical talent or skill that allowed them to be in business for themselves. There is not any real magic to owning and operating a successful business. In fact, many business owners that I deal with on a daily business in my opinion stay in business in spite of themselves. My point is that there really is not any magic to starting and running a successful business. Even as I am writing this... my second book, I am curious how I can change the lives of those who read it . But I will take it one step at a time by giving business loan brokerage owners what I feel will be the most comprehensive, real world information they can receive about getting started in what was the most lucrative of all the businesses I owned. Specifically, I want to provide my readers with a “business loan brokerage franchise in a box" concept. The idea behind my concept is to give them everything they would get if they purchased into a franchise for this type of business. What makes this even more interesting because there are really no predominant

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business loan brokerage franchisors that I know of making this publication even more valuable to anyone who wants to get into the business loan brokering business. Much like a franchise operation, I want to give as much information to my readers for them to make good decisions on everything from their niche selection, to making finding deals easy, to finding good funding sources and sending a good credit package, and everything else I have learned in my nearly twenty years of funding business loans. In December 2015, I came off a one year stint as a consultant for an equipment finance start-up doing “big-ticket” lease transactions. Prior to that I owned three car washes for approximately ten years and for many of those years I owned and operated a business loan brokerage specializing in mostly “small ticket” equipment finance deals. It was through those years that I also gained some experience in brokering real estate loans. It was the business loan brokering business that really made everything else possible. It was life changing for many reasons. Making great money was one of them!

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Chapter 2 - About this Book

I am not a writer. I will have punctuation, structure, and grammar errors through out this book. I did not want to hire a writer to put my thoughts on paper. I decided to give my readers everything I have in the best organization possible without hiring a professional writer or editor. I hope you can meddle through my lack of writing skills to get to the real "meat and potatoes" of the information I am trying to offer here. I hope you find the information helpful and enjoy what I feel will be the best information you can receive in starting a loan brokering business in publication form today. Keep in mind that most of my expertise is in equipment finance and I have also brokered commercial real estate loans and while commercial real estate is not my primary niche, it creates a huge opportunity within the loan brokering business. While this book is more specifically geared towards new aspiring entrepreneurs, some chapters will provide great information for existing loan brokerage owners. As with many businesses, certain areas are intertwined and it is difficult not to discuss one subject without it being related to another area of

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this business especially when it comes to talking about the two primary loan categories I cover in this book, commercial real estate loans and equipment finance loans. Conceptually, the business loan brokering business is the same for both commercial real estate loans and equipment finance loans in that, you find deals, package the credit information, then send it off to the funding sources of your choice. The specifics for each of these transactions is what I teach and coach in this book.

Chapter 3 - Why I Wrote This Book

It became very clear to me after much of the success I have had in my entrepreneurial life that almost everything I have accomplished was for one reason, I started brokering business loans. The simple fact that I started my own business loan brokering business in 1999 allowed me to build my first car wash in 2004, my second car wash in 2007 and my third in 2008. It was through the car wash business that I learned I had a passion for coaching aspiring entrepreneurs through car wash consulting and authoring my first book about getting started in the car wash business. After nearly five years of trying to help

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these aspiring entrepreneurs, I realized the vast majority of aspiring car wash owners would never have enough money to finance these $1 million plus businesses. In late 2015, I started polling my nearly 1,000 aspiring car wash owners and asked them if they would have any interest in learning how I made the money to get started in the car wash business and the resounding answer was “yes”! I knew that the risk and reward involved in starting a business loan consulting business was fantastic on both accounts - low risk and high reward. So why not write a book about the experience in my life that changed everything else - business loan brokering. Hence, here you have Business Loan Brokering 101: The #1 Business Loan Brokering Start-Up Guide. This is the true purpose of this publication.

Chapter 4 - Goals of this Book

1. To make sure those who get started in the business loan brokering business do not make many of the same mistakes I made.

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2. To give readers enough information that after reading my book they could broker their first deal and earn a great fee with 4-6 weeks.3. Use this as one of my tools to offer the most comprehensive business loan brokering training possible.4. To provide a new broker with an all encompassing "franchise" approach to their business.5. To continue to update and "blog" my customers with good ideas that will enhance their businesses.6. To offer the most comprehensive business loan brokering start-up manual available on the market today.7. To create an introduction and informative book for those who are interested in brokering business loans.8. Create a strong community of brokers through the BizLoanConsultants.com Forum and Facebook Group page and possibly someday negotiate funding instruments based on the overall originations of the group.

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Chapter 5 - Daily Life of a Business Loan Broker

1. Make calls to set up lunches with a couple new relationships with equipment salespeople or commercial real estate contacts (using my various recommended methods).2. Review the deals that are in process.3. Call the funding sources for deals that require additional information or attention.4. Keep the referral sources and the end customers in the loop on what is going on with their active transactions.5. Hopefully, have a closing appointment to get docs signed on a deal to earn a fee.6. Live your life the way you want to, not how

someone else wants you to.

I once read that the true definition of wealth is not necessarily how much money that you have. It is your ability to do what you want…when you want to. In my estimation, you can live that life as a business loan broker.

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PART TWO

GETTING STARTED

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Chapter 6 - Your start-up budget.

The beauty of this business is that the start-up costs are super low and the fees you earn can be super lucrative. In fact, brokering loans was the lowest investment I ever made in a business and it earned $100,000’s of thousands of dollars most years and provided more income than any other business I have been involved in. So what will you need to budget to get started. Here is a list of items I compiled that you will need to get started:

• Desk (budget $300-$500)• Desk Chair ($100)• VOIP (Polycom Phone) phone and contract with

8X8.com (budget $180)• Plantronics Headset ($200) optional• Copier, Scanner, Fax (I prefer laser printer, but ink

jet will suffice) ($400)• HP17BII Financial calculator ($99)• TValue software ($149)• CRM ($300 salesforce.com)• Website Hosting ($108)

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• Website design ($300) I show you how to do this cheap!

• Laptop ($1,000)• Business Cards Vistaprint ($25)• Brochure Design ($20 fiverr.com)• Cell phone expenses ($100/Month)• Small entertainment budget ($480/month)• Gasoline/Car Expenses ($200)• Incorporation costs ($149 legal zoom + state fees)• Fujitsu Scanner ($410) optional in the beginning• Master Mind Training ($2,000) optional• Dropbox account or external storage (optional)• External monitor (optional)• Filing Cabinet• Internet Connection

Estimated Total of $6320 (you might already have many of these items as they are typical for most home offices and you can also add the optional items was you see fit.)

VERY RARELY WILL YOU EVER FIND A BUSINESS THAT YOU CAN START FOR LESS THAN THIS! It might be the most affordable business you could ever

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start. Keep in mind, that I use what I teach in my masterminds group. If you have not subscribed to my mastermind group then you might need to rework your budget for whatever you decide to use. For example, in my mastermind group, I teach you how to host and build a professional looking website using Bluehost.com and Optimizepress. The process I teach you takes about a day to complete but can save you about $3,000. Keep this in mind as you work through your own budgets.

Chapter 7 - Setting Up Your Office/Business For Success

1. Don’t go crazy!

If you read my goals for writing this book, the first goal I listed was for others to not make the same mistakes I did when I first go started brokering business loans. I made a bunch of mistakes! One of the biggest mistakes I made was renting out space and hiring two employees very early on. It was a huge drain on the business in what was a very delicate stage of my development as an entrepreneur and as a business loan broker. In the end, I ended up scaling my

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business way back, running my business from a office I had on a houseboat that I owned and this allowed me to live what I felt was a much better existence. This does not mean that you cannot grow your brokerage into a multi-employee business that leases or owns space in a formal office setting. I would just not recommend starting that way. If you notice in my budget, I do not have any start-up costs for leasing office space. I think it is unnecessary, unless you hire employees or need to have a work setting outside of your home. Save on your budget until you have some deals in the pipeline. On occasion, the home office setting will create problems with you trying to get approved with some of your funding sources (yes, you will need to get approved by some funding sources to send them deals in some cases believe it or not!) but the overall cost of renting space is not worth some of the hurdles you might need to overcome getting approved by funding sources.

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I moved my office from a rented space about a 1 1/2 years after starting my brokering business. I remember how one of the local bankers I did business with thought I was crazy but always enjoyed meeting me on the boat.

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This was the little office I had in the back of the boat. I wrote millions of dollars of business from this little space! Notice the golf hat on the desk. Boating and golfing, two of my passions in life!

2. What You Will Need In Your Office You will need a day or two to get your office in order. Most of the equipment you will need is basic stuff. Let’s look at each item separately:Desk - not much to talk about here, use what you feel comfortable with keep in mind that in some cases you will have a stack of papers to go through although in today’s information age, most of what you receive will receive and review on your computer. Computer - a simple laptop that has half way decent power will suffice. It will require some hard drive storage as many of the credit files you receive will be large scanned files. You can always use a Dropbox.com account or an external hard drive if you have limited space. You can also use the Dropbox.com for sharing files with funding sources as you will have sometimes have problems with sending larger files via email. Dropbox.com allows you to send notification that you are sharing the files located in the folder. You will spend quite a bit of time reading and preparing credit packages. I listed the external monitor as optional in the budget section of this book but you might consider getting one once you have a few deals in the pipeline.

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Printer - printers are not as important as they were a decade ago because most of your business is done electronically. You will however need a printer and some of it’s additional functionality. The quality of a laser printer is more desirable when you need to leave a brochure or something behind on a sales call but not critical. You can also use the additional functionality of an all-in-one printer as scanning will be an important function within your office. While a fax is typically standard on the all-in-one printers, in recent years I have found the fax becoming obsolete. Scanner - In the budget section, I list a Fujitsu scanner as a separate optional piece of equipment. As you get more deals going you will definitely.Filing Cabinet - filing cabinets are becoming obsolete but are still needed unless you want to scan and organize your files electronically. I would suggest a filing cabinet that can handle legal size file folders if you want to hold on to physical records.VOIP Phone (w/optional plantronics headset) - voip phone service for small businesses is more affordable and more robust than it’s ever been. The days of buy-in high priced phone systems for voice mail capabilities are over. Companies like 8x8.com offer

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very affordable phone service that does pretty much everything. Conferencing, video conferencing, fax, reporting, virtual from your cell or computer. You name it Voip is the way to go. You will need internet service to use VOIP. You will also need to but a VOIP handset. I was very impressed with the Polycom handsets and the Plantronic headsets if you want additional comfort.HP17BII Financial Calculator - This is a calculator that you use quite often in brokering loans. There is one basic calculation that you use all the time and few others that are better suited for Tvalue software for. I preach that you do not need financial experience to get started in this business and you do not, but you will need a financial calculator and I will teach you this one simple calculation for figuring out interest rates and monthly payments. Software Packages or Web Subscriptions You Will Need - You will need a CRM package to track your contacts and funding sources the industry standard is salesforce.com. You can use others as long as you re able to track the information. TValue is a software that allows you to run finance structures that are bit more complicated. Don’t let these calculations scare

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you either they are easily learned. You will also need Dropbox or MS OneDrive - you use this external storage to keep a hierarchy of file for your business including marketing files, loan document files, and customer files. Web Design and Hosting - As a one day exercise, I help you host, then build your website, saving you $1,000 of dollars if you attend my mastermind sessions. We start with a general website then teach you how you can tweak your site to reflect any niche you decide on after you get started. If you do not attend my mastermind group you contract your web design out, use fiverr.com, or upwork.com. I am a big proponent of learning how run your website as it is the face of your business in many respects. I also show you some advanced form generation techniques so you can accept credit applications online. I talk more about your web presence in the marketing chapter in this book.

3. Start Your Preliminary Marketing

Beyond getting your office in a working state for your new business, in the first few days of your business

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you will need to start your preliminary marketing. As you first get started brokering business loans you will need to find your footing. What this really means is that most new business owners who have never brokered loans before will most likely portrait themselves as “generalists” in the industry. As you grow and learn more about the business, your likelihood of moving into a certain niche within the business becomes much greater. As an example you might start out doing deals from both the primary niches I speak of all the time in this book and in my online offering. Mainly commercial real estate transactions and equipment finance transactions. Most brokers will typically find a comfort level in doing one or the other, and many will even define their niche further by a more specific niche in the one of the two broad categories. For example, a broker who starts doing real estate deals might make a specialty of doing multi-family, or shopping centers and another broker who does mainly equipment finance might find that they find a space in the construction industry or even just doing crane finance. Your marketing will change as grow into your business but in the beginning you need to set yourself up as a generalist

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business loan broker. This effect everything from how you name your business, to the brochures you produce, to your website presence, etc.. DO NOT LET THIS HOLD YOU BACK. You need to take baby steps when you first get started. Occasionally brokers remain generalists, but for the most part they will make a name for themselves in on vertical or another. You need to spend some time getting this preliminary planning out of the way. In your first few days you will need to:

Name your business.Get a logo designed.Plan you first brochure.Start working on the content for your website.Get your business cards ordered.

Because you are just learning the business, these tasks will seem difficult. I have a few tips and tricks to get started as a generalist. To overcome some of these start-up hurdles you can do the following:

1. Name the business a general name possibly using your own name in it. It could be something like Glover Financial LL - (at a later date you can file a DBA “Doing Business As” when you decide on niche

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for example Crane Finance America could end up being your name)

2. Design a logo that looks financial in nature and that uses a tagline that is general in nature for example it could be Glover Financial LLC, “Business Loans Made Easy”.

3. Plan for a brochure that has two columns or sides, one column covering equipment finance and second covering commercial real estate.

4. You can use much of what you used getting your brochure designed to help with your web content.

5. Once you have your logo design completed, get your business cards ordered.

If by chance, you know exactly what niche you want tented because you have an inside track or a hankering for something. You can of course, be more specific in your start-up marketing. Please review the marketing section of this book for instruction on how to get your first brochure done and website done. I spend a bunch of time in my videos in my mastermind group covering how to get a decent brochure designed that covers our two primary markets.

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3. Form Your Corporation

You will need to register yourself as a corporation and become a legitimate business. I am not an accountant but I would recommend first setting yourself up as an LLC. If you grow your business to a certain level and you begin funding deals with your own funds an accountant might make the recommendation to change your corporation to an S Corp. I do not want to spend a lot of time discussing the pros and cons of each, first because I am not an expert in this area and second, in my opinion, it’s not a bIg deal until you start earning hefty fees and start doing more intricate deals that could allow you the earn equity in the deals. I see many starting entrepreneurs create roadblocks for getting started because of this. You can save a few bucks by filing with your state (or the state of your choice) by filing the papers yourself. If you want the work done for you, you can utilize a service like legalzoom.com that will typically charge you a minimal fee plus the state filing charges for you to become a legal entity. Forming an LLC protects you personally from most legal battles that you will encounter as a company. I never had any legal problems as a broker

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(except for suing a funding source for a $10,000 fee once). So I do not dwell on this too much. Just get it done!

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PART THREE

Overview of the Business

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Chapter 8 - Two Primary Markets

Most of your success from business loan brokering is going to come from brokering either equipment finance loans (or leases) and/or commercial real estate loans. As of 2014, the equipment finance market was a $900 billion industry . The commercial real estate finance market 1

was a nearly $400 billion industry . As you can see, 2

both of these markets are huge leaving much opportunity for loan brokers. These are the two markets I focus on at BizLoanConsultants.com. There are other products that I will discuss briefly including, AR Financing, factoring, SBA loans, etc.. Some of these products are very close or intertwined with brokering loans but we will focus on brokering mainly equipment and commercial real estate. Each of these primary markets can be broken down in many parts as well. My most recent consulting deal was with a

Equipment Leasing and Finance Foundation http://1

www.elfaonline.org/data/PDFs/EFIndustrySize.pdf

World Property Journal http://www.worldpropertyjournal.com/2

real-estate-news/united-states/commercial-loans-made-in-2014-commercial-real-estatemultifamily-finance-annual-origination-volume-summation-commercial-mortgage-backed-securities-cmbs-issuers-jamie-woodwell-8993.php

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“big ticket” equipment finance brokerage start-up. We targeted equipment intensive industries including, mining, construction, aviation, manufacturing, and oil & gas but we only targeted transactions that were $1MM and over. We funded over $20MM are first year. The point is that you can design your business to target whatever you want. You might want to do real estate only. You might want to do equipment finance only. You might want to only do certain types of real estate deals like shopping centers for example or you might just target construction equipment loans. The possibilities are endless.

Chapter 9 - Breaking the Business Down Into It’s Simplest Form

As a business loan broker, you will find opportunities in both equipment finance and commercial real estate, you will create a credit package, then you will “shop” it to various funding sources based on the type of loan and the customers credit. That is the fundamental foundation of brokering business loans. Your ability to “originate” or find opportunities and your ability to “fund” the transaction will determine what level of success you achieve in the business. I teach

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you how to originate deals easily, package the credit, and “shop” the deal in this book and at BizLoanConsultants.com.

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PART FOUR

MARKETING - FINDING OR

“ORIGINATING” DEALS TO BROKER

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Chapter 10 - Calling on the end-users vs. the “annuity” approach

If you did the “old school” marketing method of cold-calling small to medium businesses for their equipment finance needs or cold-called real estate investors you can be very successful in this business as it is still a somewhat popular method for originating deals among business loan brokers. In my opinion, this makes the business much more difficult and is not the best use of your time for building an “annuity” into your business.

While my definition of an annuity might not align with the formal definition of an annuity, it does support my overall theme that you should spend your time in this business with the relationships that can send you multiple deals each year creating an “amount of money that is paid to someone each year”. More specifically, if you spend your time creating relationships with equipment salespeople and/or

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commercial real estate brokers and/or property managers you can multiply your efforts 10, 20, or even 100 fold. Your ability to network with the guys who are doing deals in these areas and that can give you an endorsement into the transaction creates an “annuity” approach to your business. The ability to form these relationships will be a key factor in your overall effectiveness in brokering business loans.

Chapter 11 -Strategic Relationships You Should Focus On

Equipment Salespeople

Equipment salespeople in the markets you want to penetrate are key source of referrals. I spent years calling on and bonding with equipment sales people. From 1999 until about 2007 you could probably talk to any guy in the Pittsburgh market area who sold computer or networking equipment and they either used me exclusively for getting their deals financed or they knew of me. This “annuity” approach to the business was my key to success in originating new business. It also made the business much easier in that, I knew that after a few lunches and possibly a

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golf outing that these sales people would turn me on to every deal they had to introduce financing. Of course, once they gave me the opportunity, I needed to perform including getting the deal funded, making them look like a hero, and making sure that my progress was always being reported to all those involved.

Commercial Real Estate Brokers

One of the biggest problems in many commercial real estate transactions is attaining the proper financing. When commercial real estate brokers are bringing buyers and sellers together (both buying and selling agents), they are always aware that financing plays a key role in whether their transaction will close or not. Most will have some type of relationship with business loan broker for buyers who do not have financing in place so they can make a recommendation in this area. In many cases it will be the difference between them earning their fee or not. If you are doing a good job and you earn your place on the “short list” of who these brokers will recommend for financing it will keep your sales pipeline full and make the origination process much easier for you. In some case, these

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brokers will expect a “spiff” or commission from your for the referral but in most cases they will just want you to get their deal done. If they require a referral fee of some sort, you can negotiate the fee.

Property Managers

Networking with property mangers is a logical, meaningful, marketing tactic for business loan brokers. Property manager spend most of their time marketing to commercial real estate investors to earn fees managing their properties. In many cases their services will be utilized for services outside of just providing property management including bringing sellers of properties they are managing together with other investors they are courting or are already doing business. They also want to add value with their clients and offering up non-traditional funding sources is way for them to do this. If you perform once they refer you, they become more valuable in their clients eyes and you also become more valuable in their eyes. Many property managers also are investors as

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well so networking with them will sometimes result in getting their deals as well.

Commercial Bankers and/or Direct Reps for Leasing Companies

As a business loan broker you will deal with commercial bankers and direct sales reps from leasing companies often. When I first started my loan brokering business, I would create relationships with commercial loan brokers and leasing sales reps because of the simple fact that I would submit deals to them that I originated. Somewhere along the way I learned pretty quickly that these commercial bankers and direct reps have a dilemma on their hands when their credit officers are not willing to approve a loan or lease they originated. They need to tell their customer why their bank (or leasing company) does not feel comfortable extending credit to them. It softens the blow if they can end that conversation by reaching into their desk and puling out one of your cards and handing it to them and saying “check this guy out… he has been able to get some of these deals done for me when we have trouble doing them”. Keep in mind, according to some, statistics show as many as 40% of

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all commercial loan applications submitted to banks are declined. This makes marketing to commercial bankers and direct reps for leasing companies a prime target for the “annuity” approach I teach.

Captive Leasing Company Reps

Captive leasing companies are the finance companies that are owned by the companies they represent. An example of this would be Caterpillar Financial. This is an internal finance department that will get the “first look” at financing all the transactions for their dealer network. While most of the “captives” are more prone to approving lower credit quality deals based on their ability to re-market repossessed equipment. They still will need an outlet for deals that they are unwilling to do for one reason or another. Sometimes it will be because the deal with have additional equipment (not related to their company) and this will cause them to decline the deal. You will want to know who the players are in this area because when they start searching outside of their company they are creating opportunity for you or a

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business loan broker in their area. Just recently, I received a deal from a good friend who is a national sales manager for a lift company to the construction trade. He sent me a $90K deal because their internal financing company only provided credit to their dealer network. This was a deal that their dealership was trying to get approved for a construction company. Because they did not provide financing to “end-users” I was able to compete for the transaction.

Creating Metrics in Your Business Relationships for Goal Setting

As you are creating these relationships, you will get a feel for how many transactions these salespeople or brokers do each year. With this information you can create some metrics for what to expect in your business. It might look like this:

Relationships

10

Deals Per Year5

Average Transaction

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$100,000

Total Quoted Transactions10X5X$100,000=$5,000,0000

Close Percentage

80%

Total Funded for Year$5,000,000 x 80% = $4,000,000

Average Commission Earned

3%

Annual Earnings$120,000

As you can see, the more relationships you have formed that can refer business the more business you can write and the more fees you can earn. The example above shows what you might be able to earn in one year if you were able to close one deal a week which is not unreasonable.

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Chapter 12 - Other Types of Marketing You Can Do.

Online Internet Marketing

Years ago targeting your ideal customer and getting your message out was an arduous, expensive process. Online marketing concepts that didn’t even exist a decade ago have made getting your name and message in front of the correct person or company easier than ever. Utilizing internet marketing strategies and various “funnel” approaches you can create relationships and brand awareness like never before. Web sites like:

LinkedInFacebookGoogle AdwordsTwitterYoutube

And strategies that involve:SEO (Search Engine Optimization)

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Paid advertisingBloggingPosting on forum sites in your verticalGuest blogging on related industry blogsGuest writing for online trade magazinesSlidesharePodcasting

While explaining all of these strategies go beyond the scope of this book, you should be aware that these tools can, first, make your marketing more efficient, but also reduce your cost per lead vs the traditional relationship building I discuss earlier in this chapter. Utilizing one or all of these practices can make your marketing practices much more robust.

Chapter 13 - Setting Marketing Goals

Establishing A Top 20 Account List

When you finally settle in on a niche (or even if you remain a “generalist”) you should identify 20 accounts that would be key to taking your business to a new level. If you are in the commercial real estate niche. You might want to include the top 5 commercial real estate brokerages as “key” accounts and the top

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5 property managers as “key” accounts, the top 10 real estate investors in your market area, or a mix of the sub-niche companies. After identifying these accounts, identify who the major players are within each company and making a concerted effort to keep these accounts on the top of your list and in constant contact while you are tackling some of your other marketing efforts. Penetrating one or two of these accounts will make achieving your goals much more attainable and should be a goal of your overall marketing efforts.

Chapter 14 - A Simple 7-Touch Marketing Strategy

You can use a 7-touch approach to your marketing. When you identify an equipment sales person or real estate networking contact who can help you in your business (and you can help in their business) you should try to make a concerted effort to meet with them.

The 7-Touches are as follows:1. Call to introduce yourself and request meeting.

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2. Connect with them on LinkedIn.3. Send an email introducing yourself requesting

meeting.4. Call a second-time.5. Drop off or send physical mailer.6. Request appointment with calendar invite.7. Rinse and repeat.Your obvious goal is to get some sort of meeting with them. If you fail to get a meeting and you complete the 7 steps they will definitely know you exist. If they are what you consider a “top 20” account who meet most of your criteria as a very good strategic partner. You should start the 7 step program over. Obviously, you want to time your “touches” with them so you do not come across as a “nag”. Most likely, as you are going through the 7 touch program, they are either going to give you a meeting or let you know that they are aware of you but don’t have anything for you right now.

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PART FIVE

WHAT IS THE PROCESS WHEN YOU FIND A DEAL

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Chapter 15 - How a Deal Usually Gets Started

Step 1: You receive the call!Ok, you’ve been out creating all these different

relationships with equipment and commercial real estate sales people. Now your phone should start ringing or your inbox will start getting messages about deals they are working on. The conversation will usually go something like this:

Joe the Referral Source: Hey Buzz, I am working on a deal and my customer needs financing. It is for a D-9 Caterpillar (or a 10 Unit apartment building for a real estate referral source). Can you give him a call?

Buzz: Hey Joe, thanks for the call, (maybe some small talk about golf or sports or whatever). Let me get some additional information from you.

Then you ask certain questions so your conversation with his or her customer is more informed. The questions you ask will be based on the type of deal you are working on. Here is a preliminary set of questions you want to ask the referral source based on our two main categories of deals (equipment and commercial real estate). Keep in mind this is just a way for you to be informed about the deal before making the call to their customer therefore you do not want to keep your new referral source on the phone for a long time asking these questions. I would also

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call them instead of emailing for two reasons, one, it strengthens your relationship with them and two, if you were to email them these questions it becomes cumbersome for them to answer all your questions.

Equipment Deal (please see the Equipment Finance Deal Overview Form)

1. What is the cost of the equipment? 2. Does the cost include delivery, installation,

training, 3. What is the make and model of the equipment?4. Is it new or used?5. Did they give you any indication of how they want

to finance it 5.1. Loan or lease5.2. Term of lease (36, 48, or 60 months)

5. When is the expected delivery?6. What is their name, company name and phone number?(please see the Equipment Finance Deal Overview Form)

Real Estate Deal

1. What is the cost of the building?2. What type of project is it?

2.1. Construction2.2. Development2.3. Purchase2.4. Bridge Loan2.5. Hard Money Loan

3. What type of down payment are they making?

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4. What type of investor are they? Do they own a bunch of properties? etc.

What is their name, company name and phone number?(please see the Commercial Real Estate Finance Deal Overview Form)

The information you receive from this initial call provides you with some insight of the deal and prepares you for the call to your common customer. Once you receive this information, the phone call to the customer should happen immediately. This is where you can set yourself apart from any other banker or loan broker. Your speed and diligence will be the difference between you another person getting their next deal. You should also make sure you keep your referral source informed as to what is going on in the deal at all times.

Step 2: You call the customer.The call to the customer is usually a very easy process because you will have already received the endorsement from your equipment salesperson or commercial real estate salesperson who referred you and they are expecting your call.

The call will sound something like this:

Buzz: Hey Mr. Customer, This is Buzz Glover from the “Business Loan Finance Co.” I just got off the phone with Joe from from XYZ Equipment Company. He mentioned that you were interested in financing a D-9 Caterpillar. I wanted to call and introduce myself and

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learn more about what your interested in doing. Did I catch you at a good time to talk about this? (use same type of introduction for you and your company for a real estate deal)

Then you need to get the information required based on the type of deal.

Equipment finance deal:

(Even though you already know, you want to ask some of the same questions you asked the equipment sales person)

1. What is the equipment?2. Is it new or used?3. Is the equipment installed now? If not, when?4. What is the total cash cost of the equipment? How

much if that is soft costs (installation, training, delivery, etc)?

5. Are you looking for a loan or a lease?6. What term are you looking for 36, 48, 60 months.

(You can make recommendations in this area once you learn more about why you would structure a deal on longer or shorter term)

7. Do you want to depreciate the equipment or do you want to write the payment off as an operating expense (you can coach them on advantages of each after you learn about this)?

8. (If the deal is over $75k) can you supply me with your last three year tax returns and/or audited financials and this years interim statements?

Here is a copy of the form I would use for an equipment finance deal:

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Commercial Real Estate Finance Deal:

(Even though you already know, you want to ask some of the same questions you asked the commercial real estate sales person)

1. Customer name, email, phone, etc..?2. Address of property?3. Ownership of property, % of ownership or

organization chart?4. What type of property is it?5. Refinance or purchase?6. New construction or existing?7. Do you sign a sales agreement? If so, can you get

me a copy?8. What is the total cash cost of the property? How

much additional are you looking for for renovations, improvements, etc..

9. Are you looking for a bridge loan or a term loan.10.What terms are you looking for 20 year

amortization, 25 year amortization, 5 year balloon,etc..,

11. What are your expectations as far as prepay penalties? /

12.What type of down payment are you willing to put down? If none, do you have equity in other properties we can use as equity?

13.Do you have a pro forma or rent rolls for income analysis including move in dates, ?

14.How many properties do you own and for how long?

15.Can you supply me with your last three year tax returns and/or audited financials and this years interim statements?

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Here is a copy of the form I would use for a real estate deal:

�

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You need to let your referral source know you talked to them and that the deal is moving along (very important to do this with your referral sources through out the transaction).

PLEASE NOTE THAT STEP 4 IS SOMETIMES DONE BEFORE AND SOMETIME AFTER RECEIVING REQUESTED FINANCIAL INFO FROM CUSTOMERS DEPENDING ON DEAL SIZE AND TYPE. ON SMALL TICKET LEASING TRANSACTIONS, I WOULD NORMALLY USE A MONTHLY PAYMENT FROM A PRE-DETERMINED RATE SHEET (THAT HAD MY FEES BUILT IN) AND ASSUME THEY HAD DECENT CREDIT, IF THE CREDIT DID NOT CHECK OUT I WOULD NEED TO SELL CLIENT ON HIGHER RATE LATER (NOT THE EASIEST THING TO DO BUT CAN BE DONE SUCCESSFULLY MORE OFTEN THAN NOT) . ON LARGE TRANSACTIONS AND COMMERCIAL REAL ESTATE TRANSACTIONS I WOULD NOT SEND PRICING UNTIL AFTER I HAD A CREDIT PACKAGE.

WE COVER PRICING STRATEGIES IN A SEPARATE CHAPTER. SOMETIMES YOU WILL

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FIND CUSTOMERS WHO WILL NOT GIVE YOU THEIR FINANCIAL INFORMATION UNLESS YOU TELL THEM THEIR RATE. WHILE THIS REMAINS SOMEWHAT OF AN ART, I CAN USUALLY ANSWER THEM WITH SOMETHING LIKE “YOUR RATE WILL BE DETERMINED BY YOUR OVERALL CREDIT PROFILE BUT I JUST DID A DEAL FOR 5% FOR A CUSTOMER SIMILAR TO YOU LAST MONTH.” THIS WILL USUALLY HOLD THEM CAPTIVE WHILE YOU ARE ABLE TO CORRECTLY PRICE THE TRANSACTION

Also, let your referral source know that the deal is moving forward and keep them abreast of your dealing with their client at all times.

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Step 3 - Request Credit Package or Credit ApplicationIn smaller equipment finance transactions (usually under $75K) all you will need to do is request that they fill out your credit application. Your credit application will have language that allows you to send it to your funding sources. Here is the template we use for equipment finance deals under $75k. You can also request a brochure for the equipment and/or an equipment quote from the vendor.

For equipment transactions over $75k you will typically need to request the following information:1. A credit application (see above)2. Three years personal and business tax returns (or

audited corporate financials).3. Current year interim (internal statements)4. Short explanation of what the equipment is doing

for the company, replacing old equipment, making them more productive and how, reducing their costs, etc..

5. Equipment brochure and/or equipment quote from vendor.

6. Organization chart of owners of company.

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7. Personal Financial Statements of officers of closely held businesses

8. Equipment appraisal if used equipment and available.

For all commercial real estate transactions you will typically need to request the following information:1. A credit application (see above)2. Three years personal and business tax returns (or

audited corporate financials).3. Current year interim (internal statements)4. Short explanation of the property5. Rent roll with tenants names, lease term, how

many years in, months lease amount, square footage occupied.

6. A list of other properties owned and equity position if available

7. Organization chart of owners of company.8. Personal Financial Statements of officers of

closely held businesses9. Old appraisal if available.10.Photos of property11. Pro forma rent roll if new construction

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12.Construction bids and drawings if new construction

13.Sales contract

Step 4 - Send Term Sheet/Proposal to Customer The term sheet, or proposal can take many forms and I have seen many different forms of proposals over the years. In small ticket equipment finance hopefully you have your vendor sales representatives quoting monthly payments to all of their customers based on a rate sheet that you supplied to them. This is one way that you can earn an equipment vendors business. The simple fact that they start quoting monthly payments will help them sell more equipment.

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A quote from an equipment sales person might look like this:Notice there are monthly payments listed in the quote.

�

Example B: Sales driven company selling a product proposal

1313 Mockingbird Lane Somewhere, USA 15235

INVESTMENT SUMMARY - USA COMPANY INC.

Qty Description Promo Price Non-Promo Price (Before 10-31-13) (After 10-31-13)1 Super Special Widget $9,800 $10,000 (Includes super special feature1 and feature 2 and feature 3, etc.) Installation FREE $500 90 Day Warranty $0 $0 Extended One Year Warranty FREE* $500 Total $9,800 $10,500**(when 3 year extended warranty is purchased)

Lease Options Promo Price Non-Promo Price (Before 10-31-13) (After 10-31-13)

36 Months $302.60 $324.00 48 Months $234.00 $251.00 60 Months $194.00 $207.00

Accepted By: __________________________________________________________

UNCONDITIONAL GUARANTEE - IF FOR ANY REASON YOU ARE NOT SATISFIED WITH

OUR SERVICE OR PRODUCT WITHIN 90 DAYS - WE WILL GIVE YOU A FULL REFUND!

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Term Sheets for bigger equipment deals are much more robust and might look like this

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Home Business Broker, LLC

Term Sheet

for

XYZ Construction Company Ltd.

February 1, 2016

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Presented by: Scott Glover

Exec Vice President Phone: 412-XXX-XXXX

Email:sglover@hometownbusinessbrokers.com FROM : XYZ Construction Company Ltd.

8211 Mayfield Road Brampton, Ontario L6P 0H5

TO : Home Business Broker, LLC 9999 Saltsburg Rd. Pittsburgh, PA 15235 RE : TERM SHEET

Executives:

XYZ Construction Company Ltd. (“Lessee”) has purposefully solicited quotations and bids for the leasing of Personal Property for a minimum amount of $8,000,000.00 and a maximum amount of $12,000,000.00.

Home Business Broker, LLC and/or its assignee(s) (“HBB”) has offered a leasing arrangement to Lessee at such conditions, terms, and rates deemed acceptable to Lessee. It is the intent of Lessee to formally

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offer to HBB to lease the personal property (the “Leased Property”)

from HBB pursuant to the following conditions and terms:

NET LEASE

:

The transaction will be a net lease transaction, with Lessee responsible for all maintenance, expenses, insurance, licensing/registration and

taxes relating to the purchase, lease possession and use of the personal property excepting those based solely on the net income of HBB.

SUMMARY OF PROPOSAL

:

This offer assumes a total Leased Property Cost up to the amount of $10,000,000.00 (plus applicable sales/use tax), Leased Property

description, configuration, Acceptance Dates and terms as provided in Exhibit A and herein. Any variances in the actual Leased Property Cost, Leased Property Acceptance Dates, or Leased Property

configuration may require corresponding adjustments in the Monthly Lease Payment. HBB may adjust the Initial Base Lease Term and End of Term Options, Lease Rate Factor/Monthly Lease Payment, and Deposit to provide a combined implicit rate that is commensurate with

the implicit rate provided herein. HBB may fund up to one hundred percent of the Leased Property Cost, at its sole discretion, and at the implicit rates provided herein. Lessee and HBB agree that no oral or

other written agreements or promises shall be relied upon or be binding on the parties unless made a part of this Term Sheet by written authorization provided by authorized signers of both the Lessee and HBB. This agreement is entered into and is to be performed in the

County of New York in the State of New York, and is to be construed in accordance with the laws of the State of New York.

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LEASED PROPERTY ACCEPTANCE

:

HBB may accept all or any part of the Leased Property at its sole

discretion.

DOCUMENTATION

:

Lease documentation will be HBB’s standard Lease Agreement and

Lease Schedule generally reflecting the terms and conditions of this Term Sheet.

INITIAL BASE LEASE TERM RATE ADJUSTMENT

:

Lease rates displayed herein may be adjusted upward in direct relation to any increases in interest rate swaps and then fixed for the term of the lease at lease commencement. The base rate to be used for comparison and adjustment purposes shall be:

36 Month 1.00%

48 Month 1.33%

60 Month 1.59%

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FINANCIAL REPORTING

:

Lessee will provide audited financial statements and other business and

financial information commercially reasonable and pertinent to the Lessor.

INSURANCE PROVISION

:

Lessee shall maintain liability and casualty loss insurance on the

Leased Property in an amount, form, and insurer that is commercially reasonable.

ASSURANCE OF COMMITMENT

:

Lessee agrees to provide HBB with a deposit in the amount of one

Monthly Lease Payment which will be applied to the transaction (“Deposit”). An initial deposit in the amount of $100,000.00 is due at the time of credit approval by the Lessor. In consideration of HBB

management’s time, effort and expense in considering and responding to Lessee’s offer herein, this offer shall be firm and irrevocable for forty-five (45) business days from the receipt by HBB of this executed Term Sheet, initial deposit, and all documentation and information

required by HBB, including HBB acceptance of any modifications requested by Lessee to HBB standard Lease Agreement, Lease Schedule and other required documentation. Lessee agrees HBB may

file Uniform Commercial Code (UCC) Financing Statements to provide notice of HBB’s interest in the Leased Property. In the event HBB accepts this offer and Lessee does not fulfill its commitment with respect to completion of the terms and conditions of this Term Sheet,

including the agreed upon Leased Property Cost, then the Deposit will be considered a processing fee earned by HBB. If this offer is not

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accepted by HBB within the forty-five (45) business day limit and

Lessee revokes said offer in writing Lessee’s Deposit will be returned in full less any expenses associated with the credit and Leased Property review process.

WRIT OF CONFIDENTIALITY

: By receipt hereof, Lessee concedes the information contained within is intended only for Lessee and HBB and contains confidential and/or privileged information. Lessee hereby agrees that it will not retransmit,

disseminate, review or discuss the contents of this Term Sheet with anyone outside of Lessee’s organization other than its attorneys, auditors or other professional third party advisors not actively involved

in providing financing for commercial lease or loan transactions.

OFFERED ON THIS DAY OF_______, 2014.

XYZ Construction Company, Ltd.

BY:

NAME:

TITLE:

EXHIBIT A

LESSEE

:

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XYZ Construction Company, Ltd.

LESSOR

:

Home Business Broker, LLC

LEASED PROPERTY

:

Various construction equipment to be more fully described in Lease

Documents

LEASED PROPERTY COST

:

$10,000,000.00 Master Lease Line

LEASED PROPERTY LOCATION

:

Pittsburgh, PA

OPTION 1: NEW EQUIPMENT

INITIAL BASE LEASE TERM

:

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36 Months

48 Months

60 Months

MONTHLY LEASE RATE FACTOR

:

0.023161 0.019427 0.017324

MONTHLY LEASE PAYMENT

:

$231,610.00 $194,270.00 $173,240.00

The Final Lease Payment will be calculated by multiplying the final Leased Property Cost by the Lease Rate Factor.

END OF INITIAL BASE LEASE TERM OPTIONS

:

Purchase the Leased Property for its then Fair Market Value no less

than

25%

18%

10%

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OPTION 2: USED EQUIPMENT INTIAL BASE LEASE TERM

:

36 Months

48 Months

60 Months

MONTHLY LEASE RATE FACTOR

:

0.023684 0.019931 0.017859

MONTHLY LEASE PAYMENT

:

$236,840.00 $199,310.00 $178,590.00

The Final Lease Payment will be calculated by multiplying the final

Leased Property Cost by the Lease Rate Factor.

END OF INITIAL BASE LEASE TERM OPTIONS

:

Purchase the Leased Property for its then Fair Market Value no less

than

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25%

18%

10%

CLOSING FEE

:

A Closing Fee of 1% will be payable at final funding to Lessor.

As you can see, the term sheet or proposal for a big ticket equipment finance deal is much more involved. When you are first starting out, you do not need to know all the elements involved in this more robust “term sheet” but I thought it was important for you to know that they exist.

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Here is an example of a term sheet for a commercial mortgage. (PLEASE NOTE THAT SOME TERM SHEETS WILL NOT

CONVEY AN APPROVAL AND THEY WILL BE DIFFERENT DEPENDING ON THE FUNDING SOURCE)

�

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�

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Step 5 - Package all the information for your funding source. For small ticket equipment transactions, you should do a short write-up about the transaction. It can include what they will be using the equipment for and

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how it will somehow make them more productive, save them money, or replace old equipment. You can package this with a brochure for the equipment and an equipment quote.

For transactions over $75k you can probably get away with the same type of write up as you do for a small ticket application, but if you want to take your business to a new level you can also supply the lender with what they call a transaction summary. Keep in mind as a new loan broker you do not need to do this although learning this will take you to a new level and will earn you additional respect with the funding sources you deal with. I wanted to show you this because it is common in larger equipment finance transactions. The transaction summary is a document that goes through all of the facets of the transaction.

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The equipment finance transaction summary will look like:

�

�

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For commercial mortgage packages you will take all the information that you requested (and that I discuss in a few areas of this book), and that your customer supplied and create a package. You will include a write up of the project that includes a summary of what the transaction is all about. A typical commercial mortgage package will include the following.

- A summary of the property and/or project.

- A breakdown of ownership and their experience

- A list of other properties the ownership might be involved in

- Last three years financials of the corporate entity of owners

- Last three year personal tax returns of owners (if closely held)

- Proforma statement of property including speculated rent rolls

- Rent rolls of existing property

- Signed leases of tenants (retail properties)

- Construction budget and/or contracts for improvements or new construction

- Phase 1 (if completed)

- Elevation drawing from architect or engineer

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Step 7 - Choose the correct lenders to present the deal to based on what you know about the deal and the notes you have on each of the lenders in your database.

Here is where there is some art to your deal making. When you first start in the loan brokering business this is more difficult because you do not have any “feel” for the business. As I evolved in the business, my first outlet for most of my deals were with local and regional banks that I was able to establish solid relationships with. I started to know which banks offered the lowest rates, what types of deals they would do, and their credit tolerances. As a newbie in the business, I would try to find a bank that you had some comfort with in your initial meetings getting set up as a broker with. The other great thing about local and regional banks are that they are not very stringent in their requirements for approval as a new broker and will look at most deals (as long as it fits their criteria). In fact, I established some pretty solid relationships with a few banks quickly and single one out quickly that would get most of my “first looks”. It was a mutually beneficial relationship because they

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knew that I was loyal to them and did not mind that I would send them some deals that did not meet their credit criteria for one reason or another. Their screening of the deal would give me some indication of what I was dealing with if they declined it and then I could regroup and consider either other local or regional banks or could move in to my national database for lenders who might make sense for the credit quality or type of deal I was trying to get funded. While you can start pre screening some local banks by setting up some lunches with their loan officers or leasing representatives before you have your first deal, you will find that they have much more interest in you when you have a deal in hand. When I found a deal, I would always call my contact at my bank of first choice and tell them what I knew about the deal. Sometimes you will find very quickly that it will not fit their credit or collateral requirements and you can move on quickly to bank two and maybe bank 3. If you end up doing this long enough, you will have a sleazy banker that decides he wants to “go around” you in a deal. This means that they learn about the deal then contact your customer direct to cut you out of the deal. It sucks, and it doesn’t happen often but

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it’s part of the business. Hopefully you have established yourself with your account in way that they will look out for your best interests. Bankers who did this would obviously never see another deal from me. Most of the good bankers know this and that is why they typically will never “go around” you in your transaction which allows you to talk freely about your deals most of the time. Your choice of your “first look” bank should be the following:1. They have low rates for the type of deal your

sending them.2. They are reasonable in approving credits3. They can give you some indication of the credit

quality quickly so you can go to bank 2 or bank 3 if you need to.

4. They understand that you are giving them first look so they are more likely not to approve a high percentage of your deals.

5. You trust the loan officer will not try to jeopardize your relationship with the customer and/or more importantly, they will not try to infiltrate your vendor referral source.

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If you get decline from your bank of first choice you will be give the reasons why along with the decline. As mentioned, you can use this information to seek out your second or third lender who will most likely be a better fit based on your knowledge of them. Depending on the deal type and size and whether you supplied pricing to your customer or not. You will need to revisit how you prove the deal to your customer. If the credit is too bad and you need to go to a high rate “hard money” type lender than it will require some additional negotiation between you and your customer. Keep in mind that, even if you supplied them with some type of pricing which is typical for small equipment finance transactions, you can usually convince a customer that the financing you are offering is most likely not bankable for a traditional lender and that you are doing them a service by getting the loan approved even though it will be more expensive for them. On occasion, you will get deals that are not doable, by pretty much any lender. Newbies in the industry will spend way too much time on these deals shopping it to various funding sources to no avail. After you get some experience, you will know when to walk from an undoable deal saving you

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and your referral source a bunch of time and headaches trying to get the deal done. Shopping an awarded transaction can be a bit of a balancing act. The goal is to get an approval without shopping it to every possible funding source. If you send multiple deals to one or more funding source that never come to a positive outcome because they are always credit declines or because you end up funding through another source, the funding source will become soured because of your long history of bad deals. Once you get an approval, and your customer is OK with the structure and your pricing you will need “document” the deal.

Step 8 - Documenting the DealThere are wide variations of how your deals will be documented. It is common in small equipment finance transactions (under $75k) for you as the broker to document the deal by either using your own documents that have been pre-approved by your funding source, and that will be assigned later through an assignment document to the funding source. Let me give you an example. You get a $20,000 computer leasing transaction approved by a local bank you

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have a relationship with. Prior to you going out and getting what is usually a one page lease document signed, you get prior approval from the bank to use a your document written under the name of your business brokerage. They must agree that the language in your document has acceptable terms and conditions and that it has all the language they need to accept it as an “assignment” which is separate agreement that allows you to assign them the rights to collect payments at the terms you state in the agreement. Once you assign it to them, you earn your fee and in most cases will be completely free from the transaction as most assignments will be what they call non-recourse. Non-recourse means that the bank cannot come back after you if the lease or loan defaults. In some cases, the banks who approve your loan will require you to use their documents. This can sometimes be done in what I like to call a “semi-private” label scenario, where they allow you to put your logo and name on their document and other times you will simply need to use their documents without your name and sell your customer on the fact that you represent the bank in the market you serve and they will be servicing the lease or loan. In

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commercial mortgage transactions, my experience has always been that the banks or funding sources will generate a much more robust documentation package and a closing of some sort will be set up. These are typically done in person when using a local or regional funding source but can sometimes can be done through overnight documentation packages. It is important as a broker to attend the closing of a commercial mortgage whenever possible, because unlike equipment finance, they actual closing of a real estate transaction becomes a much more intimate transaction between your customer and the funding source and you want to maintain your posture and relationship with your client.

Step 9 - Earn Your FeeBroker fees can also disbursed in various ways when brokering business loans. It is common in small ticket leasing transactions to receive a deposit of one or two monthly payments made out to your brokerage when receiving a credit application. This fee is usually discounted from the fee you earn in the deal. As an example, if you do a $20,000 deal and earn 5 points or a $1,000 fee and you collect a deposit of $600 for

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one monthly payments on the deal, you will typically invoice the funding source for the remaining $400 owed to you. In some cases, deposit checks will be need to be paid to the funding source direct and you invoice the funding source for the entire amount of your broker fee. In commercial real estate transactions, the fee can be paid to you directly to you at closing and other times your fee will come directly from your customer or “outside” the deal. In my experience, you fee is earned when the deal closes and it is very unusual for any delay in the payment. Typically, you will not be liable for any fee recourse other than what they call a “first payment default” which is a very rare and occurs when your customer defaults on the loan from it’s inception when they fail to make their first payment.

As you can see the process varies a bit depending on the deal type, but the overall process remains the same. Find a deal, package the credit, take it out to funding sources that make sense, get an approval, document the deal, and earn a fee!

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PART SIX

An In Depth Look at Finding and Dealing

With Funding Sources

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Chapter 16 - How to Find Good Funding Sources

Building a good database of funding sources is critical to your business success and while it seems daunting in the beginning, it becomes much easier as you are in the business for while. As mentioned in previous chapters, finding funding sources for each type of deal can differ but there are many similarities. Like before, I want to deal with the two major categories we focus on this book. Equipment finance and commercial mortgage finance. Keep in mind there are lenders for accounts receivable finance, factoring, and SBA lending (which can also used in both equipment finance and commercial mortgages). I will focus mainly on equipment finance and commercial mortgages. The ability to locate and connect with funding sources is easier than ever before and much easier than when I first started in 1999 mainly because of the internet.

Chapter 17 - Keeping A Good Database for Your Funding Sources

When you first get started you will need to meet and interview funding sources to learn what type of

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business they are comfortable with, what their credit standards are, and what type of rates you can expect from them. This is done by asking specific questions and keeping track of their answers in a CRM software system. Here are the questions I used in my latest consulting gig with a company doing large ticket leasing.

Chapter 18 - Sources to Find Funding Sources

ELFA - Equipment Leasing Finance Association - http://www.elfaonline.org/ This is the major trade association for equipment finance professionals. As of this writing, you can access a funding source directory on their site without being a member of their organization and it is very robust. It gives you a listing of many of the primary banks and lessors who will look at the deals you originate. Many of the listings will be very specific on what type of transactions they want to consider including whether they will do brokered business, what their minimum and maximum transaction size will be, the credit criteria they are looking for, what

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their footprint is for doing deals, by state or country, and other contact details. It is a very helpful resource.

Scotsman GuideThe Scotsman Guide is a trade magazine for mortgage originators. It has a very robust search function for placing commercial real estate mortgages. If you enter the “lender search” function under the “commercial” tab search criteria will come up that allows you to enter the property type the state the property is located, the loan amount, the loan type, etc. You can enter one or all of the criteria to narrow your search. The information that comes up for each lender is very extensive and also includes a “proven direct lender” seal that verifies that some due diligence that the lender does have it’s own funds and that you are not “re-brokering” your loan which can cause some frustration in your business.

Local and Regional BanksOver the years, my relationships with local banks became my most valuable source for funding many of my transactions. These local and regional banks would always get my first looks for any transactions

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that at first glance, seemed to be solid credits. Depending on the deal type (equipment lease or real estate), I would usually have one bank that would be my first choice. As mentioned previously, the arrangement that I had was that they would get first look because they met much of my criteria including low rates, fast turn around, reasonable credit requirements, etc. on the assumption that if the deal did not meet their requirements they would not frown on the fact that I was sending them deals that might not always meet their credit criteria. After you are brokering loans for a while, you start learning what the local and regional banks do well and do not do well. If I discovered that the deal had a “storied” credit I would move on to some of my other funding sources that might make more sense for the lender including the ELFA and the Scotsman Guide.

National Lessors (Banks)There are national lessors and banks dedicated to both equipment finance transactions and commercial real estate mortgages. These lessors and banks will entertain transactions that fit their criteria and many of

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them will be found in the ELFA and Scotsman Guide information mentioned earlier. When I first started brokering business loans their was a national equipment lessor that’s entire niche was in small ticket (under $75k) leasing transactions. They were later bought by a bank but continue to rely on equipment finance brokers to originate a good portion of their business. There are also national SBA lenders who are doing niche type business nationally. I recently had a conversation with a national lender representative who specialized in car wash loans. He belonged to all the car wash trade association and was well integrated into the car wash industry. He was also very creative in getting these transactions funded while other funding sources were finding this industry difficult to lend to.

Insurance Companies, Private Investors, Private Equity FirmsI group these three funding sources into one group because I view them as more advanced strategies for getting your deals funded. In fact, many of these sources will be the actual source of funds for many of the national lessors and mortgage funding sources

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you find elsewhere. When and if your origination efforts become substantial and you are brokering $20MM to $100MM a year in transactions you can begin to approach these sources of funds and show them what you are doing. There is a good chance that they will have some interest in providing some source of funding to the deals you are originating if you can bring them returns that are acceptable to them at a risk level they are comfortable with. You can view these sources in more depth as your business becomes more successful.

BizLoanConsultant.com ForumWhen I first started building my website BizLoanConsultants.com, I wanted to allow subscribers of the site to share information freely about the success they were having (or not having) with certain funding sources. One of the first tools I developed was the BizLoanConsultants.com Forum.

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This forum was specifically built so brokers involved in my community could share information about the funding sources they are using successfully and for what type of deal. The forum is also a source for all kinds of information pertaining to brokering business loans. When it reaches some level of maturity, I hope it will become one of the main sources for finding reliable funding sources.

Chapter 19 - An In Depth Look on How To Approach Funding Sources.

There is a bit of “the art of the deal” in dealing with funding sources. What I mean by “the art of the deal” is that you need to submit transactions to funding sources in a way that keeps them relevant to your on-going business. More specifically, you really only want to show a deal to a funding sources when you have already done enough research on them through a phone conversation or from other information you have gathered to know there is a realistic chance that they might approve it. You need to avoid “burning out” funding sources by continuing to show them deals that do not meet their credit criteria or that are not funded with them because a lower rate player

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approved the deal as well. This is a common “rookie” mistake in the business. A new broker gets a new deal in, they package the credit, then send it to five banks that they feel might approve the loan. I did this as a new broker and I quickly learned after sending multiple deals to a few of these guys that they did not appreciate working on deals that clearly did not meet their credit requirements, or that they approved but you were unable to sell their higher payment. I always used this approach: first, send the deal to your “first look” funding source. For most of my deals this was a local bank who understood that by being my first choice they had both the advantage and disadvantage of seeing deals before anyone else, this would allow them to earn more of my business if they understood that they would also be the gate keeper for many of my transactions and in many cases would give me a credit write-up based on what their credit officers thought about the deal. If they declined the deal, I had a better idea of what I was dealing with and could then choose my secondary or next in line lenders based on what they found. Before sending the package, to these secondary lenders I would call them, let them know I was working on a deal and let

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them know the details of why it was declined by my “first look” lender (I did not always reveal that it was already looked at by someone else - it depended on the relationship I had with the lender). Many of the secondary lenders are used to being a secondary lender or even a lender of last resort, as this is what many of these lenders business plans pivot around. If, in your conversation with the secondary lender, you learn that there is really no chance for them to approve the deal based on your conversation with them then you are saving face with them and your future dealings with them. One other rookie mistake, is to take your new deal out to a bunch of lenders at once and then taking the best deal. While you might be able to get away with this in the beginning, you will find out quickly that funding sources will not give you a whole bunch of credibility when they continue to look at your transactions and never realize a positive outcome of funding the deal.

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Chapter 20 - Other Types Of Funding Sources

As mentioned, the emphasis of this book is on equipment and commercial real estate finance brokering. However, you will run into situations where you can broker deals outside of these two primary categories and still earn a lucrative fee. These include, AR Financing (Accounts Receivable), Factoring, 401k Financing, Franchise Financing, SBA Financing. There is some crossover in financing equipment loans and commercial real estate loans and the products mentioned above. For example, you might find an equipment transaction and when you start to package the loan you realize the company is in a terrible financial position by what you see on their financial statements, however, they have a huge amount of receivables owed to them that could put them in a better position of they could realize these proceeds now versus in the future. A third party AR Financing company will buy the receivables at a discount if it meets all their criteria and fund the company the money sooner than they would normally receive from their customers sometimes getting them out of a cash flow jam. You ability to recognize some

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of these situation with your customers and recommend these products will typically allow you to save a deal you would otherwise need to walk away from. While I do not have a specific database to refer you to, a simple Google search will bring up some sources. I will also try to build a database of these companies in the BizLoanConsultants.com Forum.

Chapter 21 - Funding Source Approvals

Some banks, national lessors and other funding sources are going to require that you fill out an application before they approve you as a broker. Each funding source will have their own requirements in this area. It will typically involve a credit check (see my bonus material on improving your credit if you have a problem in this area) could involve a background check and might include some minimum experience level in either equipment finance and/or commercial mortgage experience. Don’t worry there are ways to still get your deals funded! First, in my experience local and regional banks are much less likely to have you fill out a broker application, so they should be your first choice when you get started. If

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you need to use a national lessor that is unwilling to approve you as a broker based on lack of experience you can always ask them to refer one of their approved brokers and give them a call. While you might need to give up part of your fee, you will most likely still get your deal funded. A split in fees can be determined and negotiated many different ways. It could be 50-50, 60-40, 70-30 and can go either way. Before splitting fees with more seasoned brokers, I would always make sure that I exhausted all of my funding sources who are willing to allow me to earn my entire fee. Also, if you have any experience in finance or real estate, make sure you build your case for approval on the broker application. Joining national trade associations like the ELFA can also help you in this area, but keep in mind they also have an approval process.

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PART SEVEN

Financial Aspects of Business

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Chapter 22 - Remember “NO EXPERIENCE NECESSARY”

The beauty of brokering business loans is that it has a “self-correcting” aspect to it. Let me explain. When you first get started you will make mistakes but most of the mistakes will not be detrimental to the deal. You find deals, you package them, you send them out to funding sources for approval, then you (or the bank) document the deal. That’s it. Through this process you can easily learn the financial aspects of the business and when you have problems, your funding sources will always point out the mistakes you made or are making. I still consider myself a marketer more than a finance guy. There are however some primary functions in finance that you will need to learn. None of them are too difficult. The primary functions include:1. How to calculate interest rates and other functions

using a HP17BII calculator or other calculator.2. Understanding Time Value of Money (TVM) 3. How to price deals4. Understanding the difference between a loan and

an equipment lease5. What are the differences between the term options

on an equipment lease?

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6. How to read financial statements for larger deals?7. Using TValue as a tool.

Chapter 23 - Using a HP17BII calculator or other calculator.

There are many financial calculators on the market. I started out on a HP12C then later in my career moved on to a HP17BII which is what I will be teaching here. If you want to use a calculator that you already have and it is not a HP17BII try running some of the exercises here and see if you get the same result. If so, you should be OK. If not, you will need to invest in a HP17BII as this is what I know! Don’t let these exercises scare you. They are simple and simple to apply. In fact, while there are many calculations you can run on your financial calculator you really only need to learn one and it is simple. When you advance into more structured transactions you can use another tool I discuss (TValue) or you can rely on the expertise of some of the funding sources you will be shopping it to (although I think you should have some foundation of the deal before talking to them). Here is what a HP17BII looks like:

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You will use this calculator to price deals and add your commissions into deals. You can also use it to calculate what competitors rates are. There are other functions but in my experience you will use the TVM (Time Value Money) 99% of the time as a business loan broker. I discuss the concept of TVM later in this section. For now, all you need to do is learn how to use the calculator to calculate monthly payments or interest rates. When you first turn the calculator on it will most likely have the following bars in the display:

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FIN BUS SUM TIME SOLVE

Below these bars on the keyboard there will be arrows pointing up to the bars. For our purposes we will be using the FIN function for all of our calculations.

PUSH THE ARROW BELOW THE “FIN” BARThe next set of bars that come up will look like this:

TVM ICNV CFLO BOND DEPRE

PUSH THE ARROW KEY BELOW “TVM”

The next set of bars should be as follows:

N I%YR PV PMT FV OTHER

Above these bars you will either see:12 P/YR BEGIN MODEOR12 P/YR END MODE

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The begin modes and end modes are the differences between how your funding source collects payments from your customers. If they collect payments at the beginning of the period (usually monthly) they are due you use BEGIN MODE. If they collect at the end of a period you use the end mode. From my experience, most banks will collect at the beginning of the period due, so in our examples we will be using the BEGIN MODE. If for some reason your calculator starts you in the end mode you can change it by doing the following:PUSH THE KEY WITH THE ARROW BELOW THE “OTHER” BARTHEN PUSH THE KEY WITH THE ARROW BELOW THE “BEG” BARTHEN GO BACK TO THE YOUR PRIMARY CALCULATION SCREEN BY PUSHING “EXIT” KEY

YOU SHOULD GET BACK TO THIS SCREEN:12 P/YR BEGIN MODE

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N I%YR PV PMT FV OTHER

Now, don’t worry this stuff is all simple. Let me tell you what all these mean:

EXAMPLE: SOLVING FOR A MONTHLY PAYMENT

N is the term of the loan or lease. If you are proposing a 60 month term you enter 60 into your keyboard then push the arrow key below N. When you do this your screen should read N=60

I%YR is the interest rate per year. If you are charging a 6% interest rate (we have chapter on how to price your deals to refer to) enter 6 into your keyboard then push the arrow key below I%YR. When you do this your screen should read I%YR=6.00

PV is the present value or the amount of the loan or lease you will be funding. If you are brokering a $10,000loan on a piece of equipment you would enter 10000 THEN HIT THE +/- KEY to change the amount to -10000. The reason you do this is that your funding source will be paying out $10000 so you need to

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change it to a minus 10000 otherwise the payment you are solving for will show as a minus. After you enter the 10000 and the minus key push the arrow below PV. When you do this your screen should read PV=-10,000.00

PMT - is the payment you are solving for. So in this example we are going to use this key last to solve our problem and learn what the payment will be. So we will skip entering anything here as it is what we are solving for.

FV is the future value or what would be owed at the end of the term or in our example at the end of the 60 month term. It is used for balloon payments that could be used in some loans or leases (we talk about this in our pricing chapter). In many cases, when you are looking at fully amortizing a loan over the term the amount you enter here would be “0”. This means that the loan is fully paid at end of the 60 months in our example. enter 0 into your keyboard then push the arrow key below FV. When you do this your screen should read FV=0.00

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Now, because we are using the calculator to solve for the monthly payment. You simply push the arrow under the PMT key and the calculator solves for the monthly payment. In our example you should have come out to a monthly payment of $192.36.

EXAMPLE: SOLVING FOR AN INTEREST RATE

We will use the same numbers as we used in the above example and when you solve for I%YR your calculator should solve it to be 6.00 % To clear all previous data push the orange button above the CLR key in the bottom left corner of your HP17BII then push the large INPUT key. This clears all previous data.

N is the term of the loan or lease. If you are proposing a 60 month term you enter 60 into your keyboard then push the arrow key below N. When you do this your screen should read N=60

I%YR is the interest rate you are solving for. So in this example we are going to use this key last to solve our problem and learn what the interest rate will be. So

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we will skip entering anything here as it is what we are solving for.

PV is the present value or the amount of the loan or lease you will be funding. If you are brokering a $10,000loan on a piece of equipment you would enter 10000 THEN HIT THE +/- KEY to change the amount to -10000. The reason you do this is that your funding source will be paying out $10000 so you need to change it to a minus 10000 otherwise the payment you are solving for will show as a minus. After you enter the 10000 and the minus key push the arrow below PV. When you do this your screen should read PV=-10,000.00

PMT - is the payment that the monthly payment that is being collected. Because we are using the same payment we solved for in our previous example, we will enter $192.36 here and the screen should read PMT=$192.36

FV is the future value or what would be owed at the end of the term or in our example at the end of the 60 month term. It is used for balloon payments that could

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be used in some loans or leases (we talk about this in our pricing chapter). In many cases, when you are looking at fully amortizing a loan over the term the amount you enter here would be “0”. This means that the loan is fully paid at end of the 60 months in our example. enter 0 into your keyboard then push the arrow key below FV. When you do this your screen should read FV=0.00

Now, because we are using the calculator to solve for the interest rate. You simply push the arrow under the I%YR key and the calculator solves for the monthly payment. In our example you should have come out to an interest rate of I%YR=5.9986% (effectively the same 6% you used in the previous example with some rounding done by the calculator).

The examples above will be your two primary functions you will need to run on your financial calculator. However, a third important calculation is also important to know. You will need to know how the commission you will charge will effect you customer’s rate. To calculate this you will need to do use the calculations from above.

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First solve what the customer’s monthly payment is without your commission. You do this by entering your buy rate (the rate your funding source will require without your commission) into the I%YR. You can use all the other variables your customer wants in the other areas. As an example, on a $10,000 loan, that your customer wants a 60 month term and you funding source will require a 8% return. You would enter the following:N=60I%YR=8PV=-100,000FV=0Then you would solve for PMT by pushing the key below PMT. Your answer should be $2014.20This is what your customer payment would be without your commission.

But, you need to earn your fee!

In our example, let’s assume you want to charge a 5% fee or $5000. Keep in mind your 5% fee does not

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increase their interest rate by 5% but it does rase their effective rate.

Here is how you would solve for your customer’s new effective rate.

N=60I%=8%PV=-105,000 (notice your fee is added into PV)FV=0Then you would solve for PMT by pushing the key below PMT. Your answer should be $2114.92. Your fee effectively raises your customers rate by $100. But you still need to do another calculation to see what your customer’s effective interest rate is. You do this simply by entering the following:N=60I%YR (You skip this in this step until the end as this is what you are solving for)PV=-100,000 (You go back to the original funding amount less your commission)FV=0PMT=2114.92 (You use the new payment that reflects the payment with your commission)

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Push the key below I%YR to solve for your customer’s interest rate including your fee. Your answer should be I%YR=10.17So your 5% fee increased your customers interest rate by 2.17%.

You can use variations of the above examples to learn what your fee is if you sold a monthly payment to your customer and then shopped the deal for your best rate.

As an example, if in the above example you sold a payment of $2200 and wanted to earn know what fee you earned based on finding a funding source at 8% you would solve for PV to learn what your commission is. You would enter the following:N=60I%YR=8PV=You would skip this as this what you are solving for.PMT=2200FV=0Push the key below PV to solve for your commission fee. Your answer should be PV=-109,223.89 (your fee

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is anything above original funding amount, in this example your fee would be $9,223.89)

These are the most common reasons for utilizing your financial calculator. In fact, in my nearly 20 years of experience in the finance business these were the calculations I used on almost all of the transactions that I encountered.

In equipment lease finance, there are variations of the above examples because of the residual position that is taken in some equipment finance structures. The residual value is typically a variable that your funding source might give you while working on a deal. It is what they think the equipment will be worth at the end of the term expressed as a percentage of it’s original value. For example, in our example above if your funding source gives you a residual value of 20% you would enter FV=20,000 into the FV value instead of 0. This effectively lowers your customers monthly payment and adds a balloon payment at the end of the term of the lease of $20,000. Depending on the structure of the lease, would determine whether the customer needed to exercise the option or whether

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they had an option to just return the equipment. I cover various equipment finance structures in depth in the equipment finance section of this book.

Chapter 24 - Calculating Rate Factors on HP17BII

It is very common in the equipment finance to utilize what they call rate factors. This is simply using your financial calculator to solve for the payment using $1. The reason you do this is to simplify the monthly payment for different terms and interest rates. Once you solve for a rate factor using $1 you can multiply the factor by any equipment cost to get your monthly payment. Here is an example:

N=60I%YR=8PV=-1 (This represents solving for $1)FV=0Then you would solve for PMT by pushing the key below PMT. Your answer should be.020142

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You can then use this factor for whatever funding amount you need. If your funding amount is $100,000 then you multiply $100,000x.020142= $2014.20 (Did you notice that it equaled the monthly payment from our earlier examples?)

The main reason for doing this is to make it easy for you to make changes in the monthly payment when the funding amount changes which is what often happens. For example, in the above example if the equipment amount changes to $108,000, you would multiply $108,000x020142= $2175 as your customers new monthly payment. You would also use rate factors if you wanted to leave behind a rate sheet for your vendors to use to quote monthly payments.

Chapter 25 - Understanding Time Value of Money (TVM)One of the core fundamentals of all finance is the concept of time value of money or TVM. Understanding that your money is worth more to you today than it will be tomorrow or a year from now or five years from now. The reason your money is worth more now is its availability and its ability to earn

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interest earlier. There are many great videos on the web about TVM and an especially good explanation on the Khan Academy website that gets into PV (Present Value) and FV (Future Value). You should have some understanding of this concept as a loan broker.

Chapter 26 - Using TValue Software as a Tool

TValue is a software program (now also available online) that allows you to run more complicated structures in you leases and loans. While your financial calculator can do most if not all the same functions as TValue, TValue uses a much more visual approach and will allow you to enter cash flows that might be out of the ordinary to solve for the various variables you are trying to solve. An example of where TValue becomes a better tool than your financial calculator could be a deal where you earn two to three months on interim rent in an equipment lease deal that earn beyond the term of the lease. TValue is based on spreadsheet type of program where you enter how cash flows are recorded, then solve for what you are looking to determine. It also can be used

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for skip payments, seasonal payment structures, and other more structured loans or leases. One other advantages to TValue is that it will provide you with the ability to print out amortization charts for the loans or leases you structure. This could become more important when trying to determine early pay-offs and principal reduction. You can learn more about TValue at http://www.timevalue.com/.

Chapter 27 - Reading Financials

Entire books have been written about reading and analyzing financials statements. I do not want to spend a bunch of time on it here. As mentioned previously in this book, the loan brokering business is a “self-correcting” business. If you miss something, or are ignorant to something in the financial statements, most, if not all, funding sources will make you aware of what they found. With this said, having some fundamental understanding of the financial statements will save you a bunch of time when you get a terrible deal. It will also allow you to verify what your funding sources report. Having some training in this area will also allow you to gain some respect with

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your funding sources as you can point out deficiencies in your write-up (while highlighting positives). Keep in mind that most transactions over $75k are going to require financials before you can submit them to your funding source. If you have some ability to know what your dealing with will also determine what finding source you will need to send it to. It will also allow you to know quickly on where your pricing will need to be on the deal.

When reading financials, I always look for three things:Current RatioTangible Net WorthRevenue Growth

Current ratio - this is a measure of the companies ability to pay it’s debts over the next 12 months. It is calculated by looking at a companies balance sheet and extracting their current assets which consist of their cash on hand, their accounts receivables, marketable securities, and any pre-paid expenses

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and inventory. This number is divided by their current liabilities which include accounts payables and debt.

Current Ratio = Current Assets ÷ Current Liabilities

After extracting these numbers from the balance sheet and doing the calculation you should come out with a number ranging from possibly 3 down to .5 or lower.A requirement for most traditional funding sources will be number above 1 which means that the company has enough money, at least on 1:1 level to pay their bills. Most traditional lenders will want a number above somewhere above 1. A typical range for a healthy company is 1.5:1 or 2:1 which means they have adequate current assets to pay their bills.

Tangible Net Worth - The second item I look at when reviewing financials before submitting to a funding source is the tangible net worth of the company. You can find this by taking all the tangible assets of the company (do not include patents, intellectual property, copyrights, or other intangible property) and subtracting all the liabilities of the company. This

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would be comparable to calculating your equity or net worth in a personal financial statement. Many banks will have a credit limit that cannot exceed a percentage of a companies tangible net worth.

Financial Growth - Another important item I would look at when reviewing my customer’s financials was the companies growth. If the their sales revenues were increasing dramatically or decreasing dramatically, I would want to know why. If there is a story behind either scenario I would want to include it in my write-up for my finding source.

There are many other analysis that will be done by the credit officers at the funding sources that you submit your deals to. They are quick at pointing out problems in a company’s financial problems. As mentioned in previous chapters, I always had funding source that got my “first looks” and through that partnership they would review my financial packages in exchange for getting the first chance at closing on the deal. If they found a problem and did not want to do the deal I could regroup and shop it to other

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funding sources who might not be as adverse to these types of problems.

Just a quick note. You will get a lot of push back from guys in the industry who have a strong finance background who think you should know every thing they know about reading financial statements. While I agree that having some fundamental understanding of reading financial statements is important, not having this ability should not let this stop you from getting started in the business. The ability to originate business is more important than having “finance” chops! Many of your deals, especially when you first get started, will most likely be smaller “application only” without any requirement to read financial statements.

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Chapter 28 - Credit Package Checklists

Equipment Finance - Deals Under $75kMany funding sources are credit application only up to $75k but you should still include some additional information in your package.

Short write-up about what the equipment is doing for the business, replacing old equipment, decreasing costs, increasing productivity, etc. Term and structure requirements (loan or lease, lease term options, etc.)Fully completed and signed credit applicationEquipment brochure, invoice, quote or any other information about the equipment.Take down schedule (when will equipment be delivered and installed)

Equipment Finance - Deals Over $75kShort write-up about what the equipment is doing for the business, replacing old equipment, decreasing costs, increasing productivity, etc.Term and structure requirements (loan or lease, lease term options, etc.)

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Fully completed and signed credit applicationEquipment brochure, invoice, quote or any other information about the equipment.Take down schedule (when will equipment be delivered and installed)Previous three-year tax returns or audited financialsPersonal Financial Statements of all owners if closely-held corp.

Commercial Real Estate TransactionsShort write-up about the transaction. Is it a refinance? Is it new construction? Term and structure requirements (bridge loan, term loan, etc.)Fully completed and signed credit applicationProperty Information - address, photos, etc.Rent rollPro-forma if new construction Closing timing (when is customer expecting to close)Previous three-year tax returns or audited financials of corporation

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Personal Financial Statements of all owners if closely-held corp.Last three years personal tax returns if closely held. Appraisal if availableSurvey if availableSigned leases if available

Chapter 29 - Differences Between Loans and Leases in Equipment Finance

As a broker, earning commissions from brokering loans or leases there is not much of a difference. You earn a fee by bring a funding source together with a business who need capital to grow their business. Their are differences however between your product offerings when it comes to a lease vs a loan. In my experience, most of the business I funded was through equipment leases. The main reason for this was that I came from a background in equipment sales then equipment finance. I also feel strongly that equipment leasing is more predominant than equipment loans in the market place. Equipment leasing funding sources are also more predominant

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for offering third party origination or brokering. With this said you should know what the difference between an equipment loan and a lease and how some equipment loans are disguised as leases. Keep in mind you can broker all of these types of transactions.

Equipment LoansEquipment loans are typically applied for by businesses at their local banks. One of their biggest advantages are that they typically offer the lowest rates. In most cases however, the process is cumbersome. The application process can take weeks. They typically will require a substantial down payment and a pledge of collateral outside of the equipment itself. The business will show ownership of the equipment on its books for tax and depreciation purposes. Equipment loans from banks can come in different forms including SBA loans, term loans, and capital or $1.00 out leases.

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Equipment LeasesUnderstanding the difference between a “True” Lease and a Capital LeaseEquipment leasing is also a common way to acquire and finance equipment. Equipment leasing can be similar to a loan when structured in a few different ways, however, it structures as a “true” lease it will have some fundamental differences for both the business and the funding source. You should understand the differences between an equipment loan and a lease. First, leases that are structured with a bargain purchase price at the end of the term are considered a a conditional purchase and are not considered true leases. This means the business who use leases with bargain purchase term options will need to treat these leases as though they purchased it with cash for tax purposes. This means they take ownership of the equipment and depreciate the equipment as though they purchased it. These are common transactions in small ticket equipment leasing. Common bargain purchase options are a $1 Buy-Out or a 10% Purchase Option (although 10% can be a grey area for some lease structure as far as tax treatment). With a Fair Market Value (FMV) term

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option, your funding source will maintain ownership of the equipment and be able to depreciate the equipment.

“Since firms prefer to keep leases off the books, and sometimes prefer to defer expenses, there is a strong incentive on the part of firms to report all leases as operating leases. Consequently the Financial Accounting Standards Board has ruled that a lease should be treated as an capital lease if it meets any one of the following four conditions -(a) if the lease life exceeds 75% of the life of the asset(b) if there is a transfer of ownership to the lessee at the end of the lease term(c) if there is an option to purchase the asset at a "bargain price" at the end of the lease term.(d) if the present value of the lease payments, discounted at an appropriate discount rate, exceeds 90% of the fair market value of the asset.The lessor uses the same criteria for determining whether the lease is a capital or operating lease and accounts for it accordingly. If it is a capital lease, the lessor records the present value of future cash flows as revenue and recognizes expenses. The lease

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receivable is also shown as an asset on the balance sheet, and the interest revenue is recognized over the term of the lease, as paid. From a tax standpoint, the lessor can claim the tax benefits of the leased asset only if it is an operating lease, though the revenue code uses slightly different criteria for determining whether the lease is an operating lease.”3

As a business loan broker, you will need to have some understanding of this concept but you should also note to your customers that you are not a tax advisor. From my experience, customers will typically tell you what term option they want when leasing equipment. You also need to know that some funding sources will not allow you to structure true operating leases and others will. In small ticket transactions the structure becomes less of an obstacle than it does in larger $250k plus transactions.

From http://pages.stern.nyu.edu/~adamodar/3

New_Home_Page/AccPrimer/lease.htm

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Chapter 30 - Other Equipment Leasing Terminology

EBO - “Early Buy-Out” This is a term used in equipment leases that allows a customer to buy-out the equipment at a set price at some point within the term. This will allow them to avoid future interest that might be accrued if they go full term and also gives them a set price to purchase the equipment. If they do not exercise the “EBO” they can continue to lease through the remaining term.

Interim Rent - Interim rent is used in equipment finance for any rent collected before the actual lease term commences. This is used when the customs is acquiring equipment and begins to use it before the actual lease commences. A real world example of this is when I had a fortune 500 company who would order new computers for their employees each and every day. It was not efficient, to do a new lease schedule for each and every computer they bought. We would normally collect a couple months of invoices and put them all on one lease schedule. However, because the equipment was being used prior to the lease commencement date we would

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collect monthly rent for the invoices. This is also a way for funding sources to increase their yields on a transaction. The increases in yields can be negotiated between you and your funding source as far as a sharing agreement.

Progress Payments - Many equipment distributors require that progress payments are made when the equipment is ordered. You will need to include these details into your write-up of the transaction when you send it to your funding source. Sometimes the progress payments will be made to reimburse the what the lessee paid when they ordered the equipment. Other times the payments will be made directly to the equipment vendor from the funding source. Keep in mind that these advance payments will also need to be considered in the TVM model for the funding source in achieving their total yield goals.

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Chapter 31 - Benefits of Equipment Leasing

Conservation of Capital - Companies prefer to have adequate and even robust cash positions to fund their day-to-day operations. When they have capital equipment needs in many cases they prefer to conserve their cash on hand and not use it on these large equipment purchases. By utilizing an equipment lease, they can conserve their capital.

Conservation of Lines of Credit - Much the same as conserving their capital, many companies who have the ability to finance their equipment through a LOC (Line of Credit) they have with their bank would prefer to conserve their LOC’s for their day to day operations if needed. This could include payroll, inventory, etc.. Utilizing an equipment lease conserves their LOC’s for other uses.

Technology Obsolescence - many companies use equipment leases to make sure they are up to date with the latest technology. An example of this is a common “tech refresh” programs offered in the information technology sector. Short term FMV leases

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are offered to allow customers to turn in their computers and other technology equipment and get the latest and greatest every few years. This is a common structure for industries where the equipment has rapid improvements and customers need to have the latest technology to remain competitive.

Off-Balance Sheet - FASB (Financial Accounting Standards Boards) establishes the standards and practices for GAAP (General Accepted Accounting Principals) for the United States and as of late 2015, they changed the rules for lease transactions and how they should appearing on a companies balance sheet. Prior to 2015, companies could lease equipment and enjoy the benefit of not showing the liability on their balance sheets. Companies would utilize equipment leasing to better their financial reporting. They would also use equipment leasing to make sure they were meeting bank covenants in their reporting. They are now requiring lease liabilities to be reported on the balance sheet beyond being reported in the footnotes of the financials.

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Section 179 IRS - Section 179 IRS code allows businesses to fully depreciate up to a certain dollar amount of equipment in the first years. (in 2016, the amount was $500,000). In essence, this basically allows a business to substantially reduce their costs of ownership in the equipment based on the tax incentive section 179 offers. Equipment loans or or capital leases qualify for the savings. An example of this would be as follows:Equipment Cost - $100,000Total Deduction Allowed First Year - $100,000Tax Bracket - 35%Tax Savings $35,000Cost of Equipment After Savings - $65,000

Chapter 32 - Pricing Your Deals

Equipment FinancePricing your deals is where some of the art of the business comes to the surface. It can be the most daunting learning curve in the equipment finance sector of the business and can change dramatically from broker to broker and deal to deal. You also needs to integrate with how you market. Certain lease

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markets will need to be priced a certain way based on your competition and other factors. Also, the biggest factor for pricing for deals over $75,000 in equipment finance will be the credit quality of the customer.

Deals typically are priced one of two ways in equipment finance transactions. For deals under $75k, you can leave a rate factor chart for your vendors. Assume that you can get your deal done at the bank who use choose to get your “first looks” which will typically have the lowest rates. While choosing how you structure the rate sheet for your vendors, keep in mind that on lower $$$ amount deals the margins are not as great.

Here is how I might structure rates for deals under $75k:< $10,000 (Add in 8 Points to your banks “buy” rate)$10,001 - $25,000 (Add 7 Points to your banks buy rate)$25,001 - $50,000 (Add 6 Points to your banks buy rate)$50,001 - $75,000 (Add 5 Points to your banks buy rate)

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If you were getting a 5% buy-rate from your local bank, Your rate sheet that you leave with your vendor might look like this for $1.00 Buy-Out Rates.

<$10,000 $10,001 - $25,000 $25,001-

$50,000 $50,001 - $75,00036 Mo. .032234 .031936 .031637

.03133948 Mo. .024768 .024539 .02431

.02408060 Mo. .020296 .020108 .019921

.019733

Keep in mind you are leaving your vendors a rate chart that solves for $1. This makes it easy for them to use your rate chart and to quote monthly payments on their equipment proposals for any amount that their proposal comes to.

You can also quote FMV and 10% purchase options, but it becomes discretionary for you as the broker to do this and your bank or funding source must be comfortable with your documents that allow for these term options. You also need to make sure that you are making your bank “whole” through the stream of payments in achieving their yield as they will most

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likely require this if they are servicing the loan (billing and collecting monthly payments). You are in essence, “discounting” the lease or loan and achieving additional yield by your ability to receive a lump sum of 10% of the original equipment price or even higher through and FMV deal. Keep in mind that when you are structuring the leases as FMV buy-outs, you might not be meeting your customers requirements to have the lease qualify as an “operating” or “true” lease. As a broker, when questioned in this area, I would let my customers know that they would need to consult their accountants to review the structure if they wanted. In the real world, I wrote many FMV, 10% Buy-Out, and $1.00 Buy-out lease and very rarely was ever questioned about how to treat the lease on their books. If you are able to sell the 10% or FMV buy-outs you can effectively increase your fee on a deal dramatically. The discounting of loans or leases can be a bit more advanced for a “newbie” in equipment finance brokering but is not insurmountable to learn and understand.

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Pricing deals over $75k will require “price testing”. This typically is done through casual conversations when you begin to gather information or on a follow-up call once you have a chance to review their credit. In essence, you are trying to become educated on what your customer might have already done, or are doing as far your competition in getting financed. In some cases, they will come right out and tell you. They might say “my bank will do this at 5.5%”. It is your job to learn more about where they might have shopped the deal and the structure of the deal as well. If the bank is offering a low rate, you might want to ask about closing costs, down payment requirements etc. Unfortunately, you will sometime find your prospects are getting very low rates. Rates you can sometimes not compete with. Once you’re in the business for a while you learn not to waste time on real low rate players or on credits that are undoable. Keep in mind as a broker, there are a range of customer credits and pricing that are normally going to fit into your sweet spot. The highly bankable, cash rich companies or the companies teetering on bankruptcy are usually not a good fit for brokering business loans. Their are a wide range of companies

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that have various reasons for the need for money outside of what their banks are willing to do. This is where you as a broker can price your deals competitively and still earn a decent fee for your services. Your ability to identify deals in this spectrum, price them accordingly, and win business will have a lot to do with your success as a broker.

Commercial Real Estate Loan BrokeringIn many respects, pricing for commercial real estate loans is much easier. The fee is typically earned outside of the deal on a separate agreement between you and your client. The fee for brokering commercial real estate loans in most cases is 1%. In some hard money loan situations, brokers can earn fees above 1% but as a general rule 1% is the fee you and your client will typically be working with. On very large transactions, say $10 million dollars and above, this fee could be negotiated down to something below 1% by your client. According to Realtors®, the average “small” commercial real estate transaction is $1.6

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million. As you can see earning a 1% fee on average 4

commercial real estate transactions, can be quite lucrative for a business loan broker.

Chapter 33 - Prepayment Penalties

As a business loan broker, you should understand that many of your funding sources will require pre-payment penalties. While most leases will require full pay-outs, to satisfy the lease terms (monthly payments x the remaining term). Many loans will be structured with pre-payments penalties for early pay-off. These will sometimes be structured with a 3, 2, 1 arrangement which means that if in the first year of the loan your client wants to pay the remaining principal of the loan off early the bank will have a fee of 3% of the remaining principal to satisfy their requirements for lending the money in the first place. This fee is reduced to 2% in year two and 1% in year three. These fees are sometimes negotiated but are a common practice by many funding sources. The also can be structured as flat fees through the term if the

http://economistsoutlook.blogs.realtor.org/2015/05/08/some-4

comparisons-small-and-large-commercial-real-estate-transactions/

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loan. These fees are typically charged when a customer is looking to refinance the loan and not when they sell a commercial real estate property. The good news for you as a business loan broker is that this will not effect any commission you earned on the deal as a broker.

Chapter 34 - Cash Vs. Lease Vs. Loan Analysis

Some companies will perform cash vs lease or loan analysis before they acquire equipment. The analysis will typically take into consideration cash on hand before and after the transaction, tax rates, interest rates, etc.. There are quite a few resources on the web that provide this analysis. You can Google “Cash Vs Lease Analysis” or “Cash vs Loan Analysis” to explore some of these calculators.

Chapter 35 - Just a quick note about FASB and GAAP

FASB (Financial Accounting Standards Board) and GAAP (Generally Accepted Accounting Principals) are

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two acronyms that you might want to know as a business loan broker. FASB is a non-profit group that establishes GAAP. It’s primary purpose is to provide a framework for financial reporting. It will very rarely come up when discussing any deal with a funding source but every once in a while you will here a “financial” nerd mention this. I thought you should know something about them.

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PART EIGHT

Documentation

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Chapter 36 - Documentation Overview “He Who Has The Gold Makes The Rules”

In the “Wizard of Id” the last two panels from comic strip above explains the golden rule in lending. As the 5

name of this chapter implies, most of the deals you work on will require that you use the funding sources documents as the “official” loan or lease documents because “He Who Has The Gold Makes The Rules”. When I refer to the actual closing documents you are

1965 May 3, Dallas Morning News, Comic Strip Name: Wizard 5

of Id, Comic Strip Authors: Parker and Hart (Brant Parker and Johnny Hart), Section 2, Quote Page 9, Dallas, Texas. (GenealogyBank) ↩

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almost always at the mercy of the funding source you are placing the deal with. On larger deals there is sometimes some negotiation in the documentation of the transaction. This could include pre-payment penalties, interim rents in lease documents, etc.. As a business loan broker, you can sometimes have your own documents approved by the funding sources especially in small ticket leasing industry. The advantage to using your own documents is the ability to “private label” or brand yourself with your customer. Of course, in most cases you will do an assignment immediately after the closing to the funding source you “assign” the deal to. There are other documents you should be aware of outside of the loan or lease closing documents. These include:1. Non-Circumvent - a common but not

insurmountable problem with brokering loans is having banks or funding sources go around you directly to your customer once you present a deal. Your customer could also go directly to your bank or funding source once you reveal who you’re working with on their loan. If you have a level of distrust with either your customer or your funding

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source you can use a non-circumvention agreement to legally bind them to your fee.

2. Assignment - an assignment is a document that assigns your documents with their terms and conditions to another funding source who will most likely perform the billing and collections of the proceeds from the loan or lease that your customer signs. Assignments require approval from the funding source of the terms and conditions in your document.

3. NDA - Non-Disclosure Agreements are sometimes required by your customers for them to share their financial packages with you. Keep in mind that you are a broker and you will be sharing their information with your funding sources to get their transaction approved for credit. Their NDA must have provisions for this or your funding source will also need to sign an NDA to review the credit package.

4. Non-Circumvent Agreements - This is an agreement to protect a broker in a transaction. It provides that if you, as a broker, present a bank or funding source to your customer, that your

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customer cannot go directly to that bank without paying your fee.

5. D&A - Delivery and Acceptance - The Delivery and Acceptance is a document primarily used in equipment leasing transactions that the customer signs to verify that they have accepted the delivery of the equipment and will usually denote the commencement of the equipment lease transaction.

6. Buy-Out Options - Some equipment lease transactions will have a separate document that denotes what the end-of-term option will be for the lease. Typically it will have language that denotes either a FMV (Fair Market Value), 10% Buy-Out, or $1.00 Buy-Out option.

7. Credit Applications - Credit applications, while simple, usually will have language at the bottom that allow you to perform certain actions for the customer including ordering credit bureau reports and the ability to show their credit to your various funding source. The language I use as of the writing of this book is as follows - “I hereby certify that the information contained in this lease application is true and accurate and I hereby

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authorize our banks, trade references, and financial institutions the right to release business and personal credit information. In states where permissible,. A Photostat copy of this authorization shall be as valid as the original. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: we will ask for your name, address, date of birth (for individuals), and other information that will allow us to identify you. We may also ask to see your driver’s license (for individuals) or other identifying documents.”

8. Fee Agreements - Fee agreements are typically used for real estate transactions and equipment finance transactions that allow you to legally secure your fee if the funding source is unwilling to pay your fee for what I call “inside the deal”. In some instances, you will need to recommend funding sources that do not pay broker fees and a fee agreement will protect you with your customer

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when it comes to earning your fee for banks who are unwilling to pay broker fees from the proceeds of the transaction.

9. Proposal - As a business loan broker a proposal can take many forms. A typical proposal will include the term of the loan or lease you are proposing. The monthly payment. The term option possibly including a balloon payment if a loan and/or an end of lease option if an equipment lease. Loan proposals will most likely have a monthly interest rate (equipment lease proposals will not typically have interest rates in the proposal). An expiration date. Language that depicts that the pricing is subject to change based on credit analysis. Any type of guarantor information required (typically personal guaranties from owners of closely held corporations)

10.Term Sheets - A term sheet is used in large (usually $100k+) equipment finance deals and commercial real estate deals to confirm that all parties have an understanding, and are in agreement about the most pertinent details of the deal before legal documents are drawn up. It is usually somewhat informal and non-binding. It

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allows parties to avoid any major legal expenses if the major details in the deal are not agreed upon. In most finance deals, this will include the term of the financing, the monthly payment, the funding amount, and the term option. As a business loan broker you will sometimes use your own term sheet and other times use your funding sources term sheet.

11. Master Leases - these are used in finance equipment leases where there are multiple take downs using multiple lease schedules that refer back to the “master lease” so the main documents do not need to be signed on each and every transaction. Lease lines of credit require master lease agreements.

12.Schedules - A schedule is used in equipment finance to depict a “take down” or specific equipment delivery. It will usually have the quantity, the model, and equipment description, a serial number of the equipment, a monthly payment, a reference back to the master lease and date, equipment location, the name of the lessor and the lessee with signature line, the term of the lease, and possibly the term option.

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BONUS ONEBig Ticket Equipment Finance Transactions The Big Leagues Of Equipment Finance

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After a few years away from brokering business loans, in 2015 I started my second business loan brokerage business with some long time friends who I worked with in the business with over 25 years ago. We focused on brokering large ticket ($1 Million and above equipment finance transactions). Our niche was to focus on calling on CFO’s of large companies (revenues of $50MM and above) who were equipment intensive mainly in the oil and gas, energy, construction, aviation, and manufacturing. There are a handful of equipment finance brokers who target these markets. They will typically focus on large companies who have a credit profile that is more likely to be prone to broker business. The credit profiles are what they call just below investment grade and “storied” credits or companies that were solid companies but experienced some type of financial problem that makes them less bankable in some respects. While the same principals of small ticket finance hold true:1. Find the deal2. Package the deal3. Find a funding source who will approve the deal

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The transactions are more complex and more competitive in many respects. We used a process to win transactions in this “big ticket” equipment finance scenarios. For a newbie in equipment finance, this process might be overwhelming but I thought I would include it for those who might already have equipment finance experience to go after bigger deals. The process focused on five areas of the transaction. Here they are:1. Project

1.1. Who are the vendors in the transaction - (who, how many, and do they provide financing) Get the representatives names. What company does the lessee usually use for equipment finance.

1.2. Dollar amount of the project and other leasable projects they might be working on.

1.3. Progress payments - How much and when due?

1.4. Replacement equipment or Additional Capacity?

1.5. Is project already approved and what is the approval process?

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1.6. Has the equipment been ordered yet? If not, when?

1.7. What is the equipment breakdown (hardware, soft costs including shipping installation and other soft costs)

1.8. What problems have they experienced with projects like this in the past (delays, problem with vendors, etc)

2. Credit2.1. Balance sheet - Current Assets, Current

Liabilities, Intangibles (Goodwill), Total Debt, Total Assets

2.2. Profit & Loss - Last Three Years Financials P&L, Current Interim, and Projected. Need story for any losses - Why did it happen, what has been done about it.

2.3. Time in business2.4. Ownership - Names, percentages, Personal

Guarantees, Corporate Guarantees, Subs, C-Corp, Partnership, LLC

2.5. Industry - Concentration of risk (what percentage of total revenue per major client)

2.6. Any major credit problems? Large Lawsuits? Pending or past bankruptcies, etc.?

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2.7. Banking relationship - revolver (what type seasonal or long term, asset based?) Term, Debt, etc.

3. Transaction Structure3.1. Term - what does the lessee want and why?

Match life of assets to lease, cash flow concerns, etc.?

3.2. End-of-Term Options - Details. Why? What have they done in the past? What have they seen form other companies?

3.3. Reporting and Compliance Effect - GAAP Operating Lease (Off Balance Sheet), Tax Lease, Both, Synthetic Lease, Reverse Synthetic Lease, How does a given structure help? Bank covenants, stock market evaluation, reduction of taxes, etc.?

3.4. Other Applicable Structures - Step Lease, Reverse Step Lease, Seasonal Payments.

4. Decision Process4.1. Who are the participants in the decision?

Signer, Analyser, Procurer (MIS, Purchasing, Mfg., Operations, Etc.) Champion/Influencer, etc.?

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4.2. Specifically, how is the proposal analyzed? - Calculator, excel SS, T-value, Gross Payments? Did the competition tell your customer what the interest rate is or the residual percentage?

4.3. Emotional aspects - Personality, rapport,what and how will you make them comfortable to trust you with their deal. What is going on behind the scenes with all the players, etc.?

4.4. When will the decision be made? Why? What happens if they don’t make the decision then?

4.5. Other factors - personal schmoozing relationships of the decision maker with your competition - You know don’t know if you don’t ask.

4.6. What are the important decision making criteria? Rate, structure, service, capabilities, experience, etc?

5. Competition5.1. Who are they? - If you don;t know them find

out everything about them. Location, their

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names, parent company, part of a bank? Website, etc..

5.2. How are they proposing? What are the exact and specific terms and rate? What do the decision makers like about the proposal? What do they not like?

5.3. Who is the rep? What is his or her profile, experience, personality, How does the decision maker perceive the competitive rep.? Competent, likable, a pain in the butt?

5.4. Try to get competitors lease contract, review it. If decision maker does not a copy ask them if you can review it once they get it to review any pitfalls or competitive differences.

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BONUS TWO

WHAT YOU SHOULD DO IF YOU HAVE

BAD CREDIT

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Three steps you can take to still be successful getting started in the loan brokering business if you have a bad credit rating

Your credit will come into play to some extent when starting a business loan brokering business. Typically your credit will come into play when you try to become an approved broker by a funding source. Not all funding sources put you through a rigorous credit check, but some do. There are a few steps you can take to overcome your bad credit rating and still succeed in the business. In fact, starting a loan brokering business loans could be the answer to many of your credit problems. There is no better time to get started on creating a better credit profile for yourself than today.

Step 1 - My experience in brokering business loans is that local and regional banks are far less rigorous in credit checks for brokers than national funding sources. Creating relationships with these local banks should be some of the first funding source relationships you create because they typically have lower rates and have a less rigorous broker acceptance.

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Step 2 - Create relationships with other established brokers who you can fund your business through if needed. You can create these relationships either through our BizLoanConsultants.com Forum if you are an inner circle member or through some local relationships you have in your city. Obviously, you will need to negotiate some split of your fee with the broker you start taking deals to. This could be 50-50, 60-40, 70-30, going either way. You obviously only need to run these deals through another broker as a last resort.

Step 3 - Use this formula to begin repairing your credit and get yourself out of any debt causing the problems.

First list all of your debts - list in first column the total balance, then list by monthly payment, leave the next column blank, name the next column “priority”, name the next column “add-on” monthly payment, and finally label the last column Pay-Off in Months. When you are done it should like this:

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The key to this is to free up a small amount of money (or make more money from a second job or start a business loan brokering business!) to add to the first payment in the priority column, say $400 for example. When you add this amount to the first priority payment you can pay-off that liability say in 3 months. You add the $400 to that monthly payment and then to the next on the priority list and you see you can pay the next debt off in 12 months. While this takes extreme discipline, you will notice that you will be completely debt free in 7 years including any home mortgage you might have all while restoring your credit along the way. Starting a business loan brokerage business can help you tremendously in obtaining the additional cash to restore your credit.

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Appendix A

Equipment Finance Profile

(use this form when talking with an equipment finance customer)

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Appendix B

Commercial Real Estate

Finance Profile(use this form when talking with an equipment finance

customer)

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Appendix C Credit Application

(Equipment Finance)

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NOTES

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“As a companion to the BizLoanConsultants.com website, there is no better way to get started in the lucrative

business of brokering business loans”

About the author:

Buzz Glover is a serial entrepreneur who has owned a sign company, a printing company, a finance company, a mobile billboard company, a self storage company, and three car washes. Most of these opportunities were made possible by the fees he earned brokering business loans.

In recent years, Buzz has become a coach and consultant teaching the business loan brokering business where he spent most of the time in his professional career.

He now is helping aspiring entrepreneurs learn the lucrative business of business loan brokering because this was the real “home run” in his entrepreneurial lifestyle.

He also owns a handful of commercial properties in the Pittsburgh Area.

Please check out BizLoanConsultants.com to learn more about Buzz Glover. If you have any interest starting a low cost, high return business loan brokerage finance company, this single resource could be your most valuable asset in getting started.

Why Business Loan Brokering 101?It provides an earning potential that surpasses most small businesses you can start.Very low start up costs.No finance experience needed.40% of all business loan applications are turned down by banksThe equipment finance business is over a $900 billion annual marketThe commercial real estate mortgage business is over a $400 billion annual marketEarn lucrative fees helping businesses achieve their goals

Buzz GloverAuthor of Business Loan Brokering 101: The #1 Business Loan Brokering Start-Up Guide and founder of…