Leasing for

      Grow Your Business,


Build Your Merchant Base

by Charles Salyer

SO YOU HAVE FOUND THE PERFECT BANK and hired some good sales people. Now you're faced with the ultimate question, "How am I going to pay for this until my merchant portfolio can support my growth?" The answer that many ISOs have found is leasing.
   Leasing has been a part of the "point-of-sale" credit card industry since the early days. The concept of using monthly payments to make it easy for a merchant to acquire equipment necessary to run their business is universal. Merchants lease copiers, telephone systems, signs, display racks and even vehicles. Because merchants are familiar with this universally known method of finance, using leasing to help them acquire POS equipment is easy and the benefits are many. The main benefit, however, is not as a sales aide but rather as a profit generator for the ISO's business. ISOs can generate from $800 to $1,400 dollars per lease depending on the merchant's credit, the lease term and the payment. Leasing money can and has built ISO businesses, enhanced sales teams and allowed ISOs to grow their businesses while building their merchant base. Once you understand the basics and set up with a solid leasing company your future will brighten.

How it Works

Leasing is easy and should become a natural part of your sales process. An ISO simply sells their processing services, has the merchant fill out the bank's application and as part of this process informs the merchant that they can lease the equipment necessary to accept cards for a small monthly payment. Upon the merchant's agreement to this concept, the ISO presents a lease contract provided by the leasing company, fills in the payment amount and the term and has the merchant complete and sign the balance. Most leasing companies will train ISOs in how to fill out the lease applications and supply "how to" instructions. The forms are not difficult and are very clear. The processing application is then faxed to the leasing company where the merchant's credit is scored and to the ISO's bank to obtain approval. Scoring is done a little differently by each leasing company but for the most part consists of an automated system that takes into account the years in business and the credit of the owner of the business. The owner or signer of the lease personally guarantees payment of the lease. It is this person's personal information that is used to score or grade the credit. The ISO receives faxed or e-mailed notification of the merchant's credit score from the leasing company usually within hours to a few days. Based on the score, the ISO knows how much money they will be paid for the lease. The lease is mailed to the leasing company with a copy of the application. When the merchant is approved for processing, the equipment is installed and the leasing company is called from the merchant's location. This is called a verification call. The leasing company rep will ask the merchant if the equipment is installed, if they understand the terms of the lease and if they have any questions. If the verification is completed, the leasing company pays the ISO either by check or through an ACH payment directly to their bank account. The leasing company pay the ISO on the average of one to two days following the completed verification. With this process completed, the ISO is almost done. Most leasing companies have one final check system in the process. If the customer fails to make their first ACH lease payment, the ISO is contractually bound to repay the money sent to him by the leasing company within 10 days.

Rate Factors and Lease Terms

Rate factors establish the amount of money a leasing company will pay an ISO for a lease. The ISO establishes a monthly payment based on what is standard and typical for their area and equipment type. The payment is then divided by the lease factor to determine the leasing company's purchase price. Factors and payments vary based on term, credit type and equipment. Most leasing companies maintain payment maximums based on term, equipment type and the number of pieces of equipment leased. An average lease payment in our industry today is $49.00 per month. For example: a payment of $49 per month, divided by a leasing factor of .0312 (an average credit) would yield a pay out to the ISO of $1,570.51.

Selecting a Leasing Partner

Selecting a leasing partner takes time and careful consideration on the ISO's part. Look for a company that has financial strength, provides reasonable lease factors, fast credit turnaround, clear reports and good service. Many ISOs make the mistake of looking for the lowest factor. Most ISOs with successful leasing programs will agree that good service and the financial strength to weather economic changes are as equally important as rates. So where does one find a good leasing company? One of the first places to look is at your processor or bank. Many processors and/or banks maintain national leasing program relationships that provide excellent rate factors and programs due to the volume of business they refer to the leasing company. If your bank does not offer leasing ask them for a recommendation. Find out who others in the industry use and why. The annual and midyear ETA meetings provide an excellent forum to personally meet and interview prospective leasing partners.

   Finding the right leasing company for your business may take a little investigation but it will be well worth the long-term results.

Charles Salyer, a 25-year veteran of the leasing industry, has been directly involved in the creation and management of captive finance organizations for Digital Equipment Corporation, Philip Morris, and Steelcase, Inc. Mr. Salyer is the former President of Global Finance & Leasing and currently Vice President, Sales & Strategic Initiatives for Lease Finance Group, a division of CIT Financial USA, Inc.