Leasing 101: Put the 'Peddle' to the Metal and Rev Up Your Profits

Leasing 101: Put the 'Peddle' to the Metal and Rev Up Your Profits

By Corey Saftler President, Integrated Leasing Corp.

In my previous article, I discussed how your merchant benefits from leasing as opposed to purchasing point-of-sale equipment. Now let's tackle the real advantage: how YOU, the salesperson (ISO), can benefit from leasing.

When you first contact the merchant, you should be armed with your costs for processing services and the costs for the different types of equipment needed to supply that merchant with the ability to process.

There are different types of equipment available that meet each merchant's transaction requirements at a wide price range.

Benefit 1 Allowing the merchant to spread out small, monthly payments over an extended period of time through leasing enables you to upgrade the merchant's equipment from a cheaper model with a smaller commission to a state-of-the-art, more expensive model with a HIGHER COMMISSION.

Very often, especially with new businesses, the merchant is reluctant to purchase a more expensive model. But if you reduce the upfront costs and give the merchant a better product at a higher price, it earns you a much greater commission.

Benefit 2 Allowing the merchant to spread out small payments over an extended period of time allows you to set your own commission rate. Just about all leasing companies in our industry allow you to make sales based upon an established price "range."

This range varies from salesman to salesman and territory to territory and, under normal conditions, allows the salesman to raise or lower the price for leasing equipment based upon what the merchant will accept as a fair value for the service rendered and how competitive the sales environment is at that time.

When offered the choice between purchasing a transaction machine upfront for $750 or paying $25 for 48 months, the merchant often will choose the latter. At a standard lease factor rate for a good quality merchant, the salesman should receive $833.33 from the leasing company for the lease.

The result: The salesman (ISO) receives $83.33 in increased sales commission. Expanding on the above example, if the merchant were able to afford to pay at the upper "range" for the equipment - let us assume $29 per month - the commission for the same item would be $966.66.

The additional sales commission or "spread" between the cash price and the lease price would be $216.66. Assuming an equipment cost of $500, the increased ISO commission is 66.6%.

Benefit 3 Upon verification of the installation of the equipment, the ISO gets paid in full by the leasing company. Often, with cash deals, salespeople have to wait to collect their money. Sometimes this requires installments or delayed payments, which are a cash-flow and bookkeeping nightmare.

The ISO's job should be to concentrate on leads. The leasing company assumes the job of billing and collecting, thereby freeing up the ISO to acquire more merchants.

Benefit 4 The top leasing companies' turnaround time for approval is usually a few hours. This affords the ISO nearly immediate feedback on the merchant's credit worthiness, which, in turn, gives the ISO the ability to concentrate on the good, profitable merchants and not waste time on the potentially poor, non-performing merchants. Benefit 5 Smaller monthly payments allow you to add equipment and increase sales. You may be able to add a value-added service such as a PIN pad or a loyalty card program for a small monthly fee.

Using a merchant with good credit as an example, that means that, by adding an additional $10 payment to the monthly lease, the salesman (ISO) receives an additional $333.33.

(Next: Merchant quality and why sales commissions vary from one deal to the next.)