How to choose an equipment finance broker in Australia

Key facts

• Check the licence first. Ask for the broker's Australian credit licence number, or their credit representative number and the licence it sits under, then look it up on ASIC's professional registers search. It's free to search.

• Ask how the broker is paid on your deal. In general it's a commission from the lender, often built into your rate, and some brokers charge a fee as well. Get both in writing before you sign.

• Compare quotes on the total you'll pay, not the rate or the fee alone, with the same amount, term, deposit and balloon on each.

• Ask how complaints are handled and which outside scheme you can take one to. EasyAsset's is the Australian Financial Complaints Authority (AFCA).

• The city a broker is in matters less than their licence, their lenders and who handles your deal. Most of the work happens by phone and email.

A broker does more than find you a rate. They decide which lenders see your application and how the deal is structured, and with many lenders they have a say in where your rate ends up. So it's worth checking them before you hand over your bank statements and BAS.

This guide is for business owners working out how to choose an equipment finance broker, and for the accountants they ask, "Who should I use?" It covers how to check a broker's licence, how brokers are paid, what to ask before you sign, and whether the city they're in matters.

Step one: check the licence on ASIC's register

Ask the broker for one of two numbers: their own Australian credit licence number, or their credit representative number along with the name and licence number of the licensee they work under. A broker who has them can give them to you on the spot.

Then look them up. ASIC's professional registers search covers credit licensees and credit representatives, lets you search by name, ABN or number, and shows the number, start date, status and any conditions for free. ASIC suggests searching its registers before you choose a professional, to check they're registered or licensed.

Make sure the name on the register matches the person and business you're dealing with, and read the status and any conditions.

Step two: find out how the broker is paid

A broker has to be paid, and that's fine. What you need to know is how, because it can change what you pay. In general, the money comes from one or both of these:

• Commission from the lender, usually paid when the loan settles. With many asset finance lenders, the commission is built into your rate: the more the broker takes, the higher the rate.

• A fee the broker charges you, sometimes called a broker fee or origination fee. It may be paid at settlement or added to the loan.

Lenders can charge their own fees too, such as an establishment fee. That money goes to the lender, not the broker, but it's still part of your cost.

Before you sign, ask every broker to put four things in writing: the rate, the repayment, every fee and who gets it, and what the lender pays them on your deal.

Example: two quotes on the same tractor

This example uses round, illustrative numbers. It isn't a quote, and the figures aren't current rates or fees.

A farming business wants to finance a $100,000 tractor with a chattel mortgage over five years, with no deposit and no balloon. Two brokers send quotes. The lender's fees are the same on both, so they're left out.

Quote B looks cheaper because it has no broker fee. It isn't. Its repayment is $50 a month higher, which adds up to $3,000 over 60 repayments, twice the fee on Quote A. Over the five years, Quote B costs $1,500 more.

The difference here is how each broker is paid. Quote A's broker charges a fee you can see and takes less from the lender, so the rate is lower. Quote B's broker charges no fee and is paid through a higher rate. Neither is wrong, but you can only compare them on the total. If one quote has a longer term or a balloon, the repayment drops but the total usually goes up, so ask for every quote on the same structure.

Step three: ask these before you sign

1. Which lenders will you look at for this deal, and why those? A big panel gives you more chances of a fit, but only if the broker checks the lenders that suit your machine, your industry and your numbers.

2. Which lender are you recommending, and why that one over the others? You want a reason, not just a rate.

3. What are you paid on this deal, and by whom? Get the answer in writing.

4. What will I pay in total, with every fee and any balloon? Ask for it on the same structure as your other quotes.

5. Who handles my deal from quote to settlement? One person who knows your file saves you explaining it again on every call.

6. How do complaints work, and which outside scheme can I take one to? If a broker can't tell you, that's worth knowing before you sign.

Does the city your broker is in matter?

Less than most people expect. The lender decides on your business, your numbers and the machine, not on the broker's postcode. Most of the work is paperwork, such as quotes, invoices, bank statements and BAS. It moves by email, and contracts are often signed electronically.

Where location can matter:

• Used machines and private sales. If the lender wants an inspection or a valuation, ask how the broker arranges one where the machine is.

• Time zones. If you're in Perth and the broker is in Sydney, ask what hours they keep.

• Meeting face to face. Some people prefer it, and that's a fair reason to pick someone nearby.

EasyAsset's office is in Zetland, Sydney. Wherever your broker is, the checks above matter more than the distance.

The broker's view

Ask any broker, me included, two things before you sign: what are you being paid on this deal, and which lenders did you look at? If they won't put both answers in writing, I'd keep looking. And don't stop at the rate, because the term, the balloon and the fees can matter just as much.

Ayman Ziad, Business Development, EasyAsset

Where EasyAsset comes in

EasyAsset is an asset and equipment finance broker, and we work with 60+ lenders. Check our numbers on ASIC's register, then ask us every question on this page. If you're financing a tractor, harvester, seeder or sprayer, start with our agricultural equipment finance page.