Monitor: Compared to this time in 2006, what would you say the outlook is for business in 2007? Is business shaping up to be better, not as good or about the same as in the first quarter 2006?

Heather von Bargen President, Caladesi Capital

Heather von Bargen: Caladesi Capital’s volume is up over 2006. We’ve expanded our business by hiring in key areas to maintain excellent service levels. That being said, I am seeing some strange industry happenings. For every broker I talk to who is busy, I talk to one that’s slow. With regard to funding sources out there, with some, I see credit windows widen. With others, I hear of imposing volume requirements. I also see a variety of newer, niche-market funding sources entering the arena. And I’m still seeing mainstream A credit funders being more selective about with whom they partner for business. There may be more changes with regards to the players, still I’m confident 2007 will end up being an excellent year. Of course I hear rumblings about a somewhat murky economic forecast but I try not to get caught up in all of that.

Sonia von Matt Stoddard: I think it’s a good time. I see this as a year where my clients will be making serious changes in order to improve productivity. Many of them who updated because of Y2K are now revisiting their equipment and software. They are finding that perhaps they may have waited too long. On the other hand, I’m also seeing some more challenging credits than before. It’s a great time to touch base with my existing clients, discuss how they feel about their business and to get a feel for what is on the horizon.

Larry Greer: We are experiencing significantly higher levels of activity and it’s not coming from any one sector. I am seeing higher levels of requests for quotation on high-tech equipment. Perhaps this is a result of the introduction of the new Windows Vista operating system. Moreover there are clearly more companies large and small, which are increasing their budgets and investments in hardware and software to protect their networks and servers, and eliminate nuisance spam, and phishing and hacking problems.

Brian Montgomery: Perception vs. reality, fact vs. feeling, these are really the issues that I find myself considering when comparing 2006 to 2007. The reality is that using my accounting software, I could tell you exactly how this year compares to last year and support it with cold hard facts, but that discussion is much less exciting than my perception of 2007. However, I am an optimist by nature and I feel positive about our future as lease brokers because the future of small businesses accessing capital for growth is bright.

Rick Wilbur: We had a great 2006, and we expect a better 2007. We have a very old-fashioned business model in that we truly try to work on account development and account retention. We made a decision at the end of 2005 to outsource some of our origination opportunities, and spend more time developing deeper relationships with our existing accounts. We’ve got more business from the same core group of customers, without sacrificing new business opportunities. I’m kicking myself that we didn’t think about that sooner.

Corey Bell: Compared to 2006 business is about the same. Having said that, I think the outlook for 2007 is much brighter. As a whole, 2006 was a down year compared to the previous two. Going back through the years, this has been a recurring theme. I have two outstanding years followed by a slowdown. As a one-man shop, it’s clearly more noticeable for me than others that may have a more diverse customer base.

M: What would you say is the single biggest business challenge you are facing in 2007?

BM: A few months ago, I wrote a letter to the editor of the Monitor outlining the need for self-governance in our industry and my fear of federal regulation if some of the players did not clean up their act. I still feel that way today. I can deal with the challenges I can control, but I have no tolerance for the roadblocks created by unethical business practices. Ultimately, I hold these companies responsible for creating some of the biggest challenges that I see as an independent broker.

SvMS: Finding, nurturing and keeping existing business, then again finding new, financially viable clients that are willing to invest time and effort into new systems to enhance their business. It’s every entrepreneur’s challenge to continue efforts on the business development side. This is most important when business is brisk.

CB: Getting back to basics and staying there. As a one-man shop, I’m earning 100% off my own efforts. J. Paul Getty wouldn’t approve. Getting on the phones and farming for business is what got my business where it is today. When times are good, we have a tendency to sit back and wait for the phone to ring. To take a small business to the next level you have stay on it even when you’re busy.

HvB: More time in the day to get it all done! I know I’m not alone in that challenge.

LG: For the first time in my 33 years in this business I enter the year thinking that there are fewer challenges and more importantly, fewer impediments to success than at anytime in my career. Perhaps the biggest challenge is that gnawing feeling in the back of my neck, which asks the question… “When is the other shoe going to drop?” I am serious about this because throughout our industry’s history we have been trained to be adept at dealing with change. “Changes bring opportunities,” we have heard from the old pros. But when you think about it, the market remains liquid and the availability of high-caliber funding sources remains very strong. There was no significant tax reform. We appear to be putting behind us a year in which we were bombarded with the “leasing fraud of the month.” The economy is still strong, and today the Dow Industrials crossed the 12,700 mark. And I keep thinking, “Oh yeah, something bad is right around the corner.”

Rick Wilbur Managing Partner, Charter Capital/Media Capital Associations

RW: There are two challenges, and they’re related: I think finding the time to take advantage of current technology is a challenge because it’s not something that you look at simply. When you employ new technology, it changes everything about the way you do things. Your processes and systems that have become habits also change. Some changes are identifiable and forecastable, some of them aren’t. Staying focused on that and staying committed to that course of action is essential for companies to remain competitive both today and tomorrow. The other challenge: Instead of just doing business as usual, it’s important to be alert to strategic opportunities with selected partnerships, within the lending community, with the vendors and lessees we work with. I think it comes with distinguishing ourselves from other leasing companies or lease brokers by creating these partnerships and securing avenues of origination. We have a subcontract with a business cooperative that has 290-member companies all of whom lease. Developing alliances like that, doing them formally and doing a good job at them — that’s where the technology comes in. In order to do that, you have to be competitive technologically.

M: What are some exciting opportunities you face in 2007?

RW: We have two strategic alliances; we’re working on creating a joint venture between those two companies and ourselves, and really getting a commitment for long-term origination of business and long-term funding of business. That’s what floats my boat. I love to do deals, but to work on a project like that where it really requires more mental exercise and vision.

HvB: I’m answering this question on a personal note. There are so many opportunities, I’ve a hard time knowing where to start. Strengthening my relationships with funders, lessees, vendors and service providers is a key goal for me in 2007. I have a renewed focus on my own business as I leave the board of the NAELB after many years. I look forward to watching the next group of industry leaders take the helm.

CB: Again, it’s really about “getting back to basics.”

Larry Green EVP/Principal, GPS Capital and NAELB Communications Committee Chair

LG: We are consciously broadening our market segments to include more penetration into high-tech on the one hand and specialty vehicles on the other. The quality of specialty funders and our own core funders have greater capacity than ever before. We see this as an area, which will allow us to provide real value-added services to our client and referral base, as well as solid margins and better flow business for the future. Yes, we know that changes in market strategies present challenges and surely we can fail … but I think we are going to have a lot of fun trying not to fail.

BM: I think my greatest opportunity lies in the fact that I know who I am and who I am not! The fact that I am not part of a multi-national three-letter acronym leasing company is a positive thing for my clients. Because the clients I work with tend to share the same values and speak the same language as I do, we can avoid many of the issues other companies may find more difficult to navigate.

SvMS: Educating business professionals, specifically those people who are acquiring equipment, on the benefits of leasing, will always remain an opportunity as well as a challenge. Getting new people on board, that have been educated in all aspects of leasing, continues to be a great opportunity to network and refer mutual business.

M: What would be your advice to a new broker entering the profession given today’s challenges and opportunities?

CB: My advice … get on the phones! Obviously you have to know your market, but until your market knows you, you’ll be eating Ramen noodles. Too many new brokers spend their time e-mailing, faxing, redoing their website, etc. All of those things are fine, but they are no way to form a lasting relationship with a customer.

Sonia von Matt Stoddard Stoddard & Associates and NAELB Director-at-Large, Communications Committee Liaison

SvMS: Learn as much as you can about the business from books, other brokers, funders, and accounting and legal professionals. Seek out seasoned brokers who are willing to act as mentors. Then, get involved with professional organizations. The NAELB is a great place to start. With clients, focus on the relationship in order to build trust and become a trusted advisor. This is a fine profession. If you can focus on what is important, it can be very rewarding, professionally and financially.

LG: First, just go for it! You could not pick a better time to enter this marketplace.

Second, join the NAELB, and you will have access to all of the tools and support and valuable advice. My only caveat is you got to like it. Actually you almost got to love it to be really successful. So if you don’t like equipment leasing and you are only in it only for the money — go sell something else. It’s not made for everyone — and a few “missing screws” won’t hurt you in this industry, either.

BM: This topic is actually one that we are preparing to address at the 2007 NAELB annual conference in Nashville. We will be presenting a four-hour course entitled Broker 101: The Foundation. Many new brokers wrongly place greater value on a vendor relationship than that of their funding partner. A funder that is a great partner is much more difficult to replace than a vendor in your marketplace. You have to protect that relationship in everything you do.

RW: I would strongly suggest they find an “old leasing dog” like me — somebody who enjoys a good solid rep for fairness and competency. Go work for that person for three years with the understanding that you’ll give him your business origination and he should teach you everything he can in that period of time. There is absolutely no substitution for the kind of experience you’ll get from doing things in this business. The more you do it, the better. And there’s no way to teach the little nuances — the things that raise their ugly head from time to time. I don’t think you can learn that in a course, or a book. You have to roll up your sleeves and get your hands dirty.

HvB: Don’t expect great wealth overnight. I suppose it can be done with loose ethics. However, I caution people to lower their expectations. I tell folks it requires a lot of effort and more time than most people think to succeed. I also encourage brokers to know their funder! Know who is buying your deals, know how they will treat your vendors and lessees, know who is actually servicing the paper. Nine times out of ten, when a broker has issues with a funding source, it is a direct result of the broker simply having no clue with whom they are entrusting their business success. It boggles my mind.

M: What do you look for in a broker/funding source relationship? What are the most important attributes you look for in a funding source?

SvMS: The funding source must be really specific about the parameters and types of transactions they seek as well as what they are not willing to take on. Some of them are really good at this; for others it continues to be a challenge. They must also be responsive and listen carefully to what the prospective client is saying and asking, and respond accordingly. Brokers are essentially the funder’s “face” to the outside world. Help us look good, and we will bring more business your way.

LG: I look for a quality craftsmanship. Someone who takes true pride in his or her knowledge, expertise and commitment to excellence … almost to the point of obnoxiousness. I’ve been very impressed by a number of the younger professionals who are entering our profession in particular on the funders’ side, so age is not a factor. Experience is great … but commitment to excellence … Priceless!

HvB: I’m sure you’re expecting low rates as the primary factor and while I am not asking anyone to raise my cost of funds, I argue that making it easy to do business with a particular lender is the most important attribute. With the time constraint I mentioned earlier, a funder that views a partnership with my company as an investment of their time and resources is one I’ll send my business to first. Turnaround time on approvals and easy fundings also make my job easier. Open communication both ways is a key success indicator.

RW: Mutual respect. Short and sweet. If they can’t respect me and I can’t respect them, there’s no way we’re going to be able to do business effectively together. To me, that’s all encompassing.

BM: I am looking for a partner, a source that understands that we are on the same side and share the same goals. A source that understands the market we serve and why we have the deal. I enjoy relationships that put us into a position of being known for what we did “for” a client and not what we did “to” the client.

CB: As my wise father once told me, “Everyone will do the ‘A’ credits and no one will do bad ones. We earn our money in the gray area in between.” In the gray area, the broker and the funder have a synergized relationship. As a broker, I’m looking for lenders that have the ability to look beyond a scorecard, listen to me, and see the deal for what it really is.

M: What do great equipment leasing brokers bring to the table that would compel a client to use a broker’s services versus seeking funding from a direct source?

Corey Bell President, Lanier Funding

CB: A broker brings value-added service to their clients. For a vendor, the broker provides a much better opportunity to getting deals approved. A direct source has only one set of credit parameters. Why do you think vendors have “lists” of finance companies they work with? Simple, they haven’t found a good broker, yet. Additionally, a good broker knows both the customer’s industry and the broker business. This relationship is invaluable to the end-user.

SvMS: This is all we do. We are the experts. Why wouldn’t you use us? We have access to a much larger pool of sources. We know funders’ niches and reputations. We know the questions to ask, the information to seek and we don’t spend time on useless research. A lease broker should be a trusted advisor, right up there with their financial planners, accountants and lawyers. In fact, we should all be working together as a team.

RW: We offer many things to a client that a direct source can’t. For example, we have a client we started doing business with four years ago. In that four years, we’ve done specific transactions with them for almost $7 million for a wide range of equipment. The reason why we got that account in the first place is that their bank wouldn’t or couldn’t finance a particular type of equipment. As a broker, we have tremendous flexibility and creativity. The customers we work with, they’re very smart in their respective fields and most of them are successful in their fields. But they don’t know what we do or what’s possible. Consequently, those that are a good fit for us, they look to us as a consultant. If they have an equipment acquisition issue, they’ll call us. And we’re going to tell them how they can structure it, what their options might be. We give them data so they can make an intelligent and informed decision, as to what is best for them. And then we go get the funding at a very competitive price. And that’s truly how we see our business.

HvB: A great broker will help their vendors and their lessees as a consultant. In our vendor relationships we act as a sales partner to help our vendors close more sales with our services. We don’t get paid on declines so we will help them get the less than perfect credits approved. Any funder out there will buy “A” paper at a decent price. We’ll fight to get deals done, and we’ll be flexible with regards to any issues that might arise. Name the unique issue your end-user might have with a lease, and we can probably get around it. Our company is small and personal, as are most brokers. Our personal service makes us stand out in this era of five-digit extensions and voice-mail systems. I’ve gotten several deals funded simply because we returned a phone call.

LG: It starts with honesty and character. If you are honest — you will not lie to your clients and perhaps of even greater importance — you won’t lie to yourself! If you are honest you will work as hard as you can to meet all commitments. Honesty and character mean that a truly great broker or funder not only believes they provide real value — they can recite their value-added proposition without a sales script and without hesitation. They believe it, they know that they can deliver on it because they actually have delivered on it, and they can give you numerous clients who will attest to having benefited from and experienced their value-added product or high-quality service.

Brian Montgomery Owner, Express Funding Solutions and NAELB President Elect

BM: I have worked for direct lenders and as a broker. I have seen the benefits of quick decisions because I was able to walk across the room and get in front of a decision maker. I have seen that same benefit turn into a liability when the answer is “no” because a piece of the puzzle didn’t fit neatly into the credit box of that lender. As a broker, we have the ability to offer a variety of choices to fund transactions because our job is to know the products of multiple funding sources. This ultimately leads to more closed transactions at a competitive offering. I would not want a reader to think brokers are simply good for lesser credit deals. This is simply not the case as a broker may also be an expert in obtaining niche financing for specific industries or establishing programs. Brokers have the ability to move within the market and seek out the best solutions for their clients needs. This ability is what sets us apart.

M: In closing, is there anything else that you’d like our readers to know?

RW: I wonder why no one has ever generically questioned the lending community as to why they constantly continue to support those people within the industry that are universally regarded as less than ethical. That in by itself gives them an unfair advantage, because they don’t play by the rules. And those of us that do are at a distinct disadvantage. I think that’s the biggest threat to our industry. The potential for regulation within our industry is very real and that would be horrible.

LG: Ask folks, even the old pros — Have they learned from their mistakes? What have they learned from their mistakes? And finally do they read about the mistakes of others in our industry and learned from that as well? My partner and I spend time asking ourselves what we have done wrong and what we can do better. By sharing this critical information amongst ourselves and seeing so many NAELB members share similar information with new brokers and funder members, I say we’re bound to help insure a better leasing industry for those who follow.

SvMS: What are organizations like the NAELB doing to bring increased respectability to this profession? We are raising the standards. At this year’s annual conference, we will be administering the first ever NAELB Best Practices Broker™ test. Up until now, we’ve had a Code of Ethics.

HvB: I applaud the Monitor for taking an interest in the broker community. It’s been long overlooked. I am curious to read what a roundtable of funding sources has to say regarding their broker business. I think you should ask them their thoughts on the value of a broker.