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Mortgage brokers warned of asset finance complexity

by Reporter6 minute read

The president of the Commercial Asset Finance Brokers Association of Australia has urged mortgage brokers looking to diversify into asset finance to “do it properly and not end up on A Current Affair”.

David Gandolfo, president of the Commercial Asset Finance Brokers Association of Australia (CAFBA), noted that more brokers have been moving into the asset finance space in recent years. However, he urged home loan writers that are taking up this work to ensure they are properly trained.

Mr Gandolfo explained: “The asset finance broker market has matured and perhaps one of the reasons for that is that there are more and more means by which you can access asset finance. Our competitors are the banks, who are our funders, but we're also seeing that there are more mortgage brokers moving into asset finance.

“I wish them well, but I’d like them to do it properly and not end up on A Current Affair and make the rest of us look bad.”

The asset finance broker and director of Quantum Business Finance said he was concerned that some brokers may not realise the complexity of the sector after he had "read some articles from the mortgage space that say 'asset finance is fairly straight forward, you can do motor vehicle finance up to $100,000 and all you have to do is tick a few extra boxes'".


He argued: "That is true, motor vehicle finance to that point, in some circumstances, is actually a fairly straight-forward, low-doc kind of product... [But] even if you can put in a motor vehicle application for $60,000 it doesn’t necessarily mean that you know how to structure the transaction correctly in terms of the term, the balloon, the life of the asset, the usage of the asset etc. All that means is that you know how to put in a car application, which any broker can do… That is not what makes them asset finance brokers.”

"In a way, I lament the fact that it actually dumbed down the industry. It makes it easier for people to get into a market that they are perhaps not experienced in," he added.

Mr Gandolfo emphasised that asset finance covers more than just car loans, and urged those looking to expand into equipment, machinery, infrastructure, and corporate lending to ensure they are properly trained.

He said: “Our members can do plant machinery, equipment, infrastructure, they can import machinery in from overseas, they can organise lines of credit, they can do transaction in foreign currencies, they can do progress payments in different countries as well as here, they can do entire projects. And all that requires some expertise.

“It certainly requires expertise not just in putting the loan submissions together but also putting together the solution for the end customer… it requires a lot more expertise than is required simply by doing car finance.”

The CAFBA president suggested that mortgage brokers looking to take on asset finance outside of car finance “need to tune their thinking into what the asset is going to do for the business”.

“So, if your client buys a new piece of plant machinery, it’s either going to produce something new or do a process that was previously outsourced, it’s going to increase throughput capacity and complement whatever they have in their factory or business.

“You need to be able to write a brilliant submission about what the purpose of the asset is going to be and the positive impact it’s going to have on this business if you want to convey to a lender, who has never seen this asset before, its benefit. You need to be able to convince them as to… why it is the right solution in that business owner's growth strategy. You need to be able to show, in the cases where an asset doesn’t necessarily tick all the boxes, that even if it doesn’t fit all the parameters, it still makes sense.”

According to Mr Gandolfo, one of his “major frustrations” is when customers go to banks to help with the purchase of a piece of equipment and the banker offers an extension on a home loan or overdraft.

He adds: “That’s something we want the mortgage broking market to avoid doing as well. If someone goes along to a mortgage broker who is not well versed in asset finance and wants money for a piece of equipment, quite possibly the broker will utilise the product that he understands well, and provide them with an extension of their mortgage. But it’s not necessarily going to be the right solution…

“If mortgage brokers are going to be doing asset finance, we would want them to do it properly.”

He concluded: “Finance is an enabler. Our business isn’t about lending money necessarily; its actually about creating jobs, growth, outcomes, equipping businesses with the assets and means by which they can grow, expand, employ and prosper.”



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