Lease Referral Fees
Generate $49,000 In First Year
Over $1.8 Million In Transactions
A lease referral program has given Anchor
Bank ($650 million, Wayzata, Minnesota) an
additional source of fee income, and another way
to expand and solidify relationships with
customers.
In 2000, the first full year of the program, the
bank earned referral fee income of $49,000 on
total leasing volume of more than $1.8 million,
says Tom Erickson, Chief Credit Officer. This
involved 32 lease transactions, for an average of
$57,000 each.
This year, Erickson estimates the bank will
reach $2 million in lease volume, and he notes
that sales are on target to achieve that goal.
When the bank first looked at offering a
leasing program two years ago, it did not
seriously consider doing it in-house, because it
would have required starting from scratch, he
says. “At that time, we were not prepared to do
that. We did not have leasing expertise on staff.”
The bank selected Synergy Resources
(Minneapolis, Minnesota), he says. Under new
ownership, the name of the leasing company is
now U.S. Bancorp Business Equipment Finance
Group-Bank Services.
Here is how the program works:
· Co-branding, rather than private label
was selected. “We wanted to be up front with our
customers about who is providing this service,” he
says. When a customer calls the phone number
for leasing, the vendor representative answers as
Anchor Bank Leasing Department.
· The bank provided a qualified list of
customers to the vendor. Before providing the
list, the bank sent a letter to all business
customers and described its alliance with Synergy
Resources.
· The vendor markets the program with
direct mail and telemarketing. Interested
customers work directly with a vendor rep to set
up a leasing program that meets their needs.
· Calling officers advise customers that
the bank offers leasing. “In many cases, we know
customers were leasing equipment from various
sources. We inform them that Anchor Bank can
help them in the leasing process.” If a customer is
interested, the officer gives the client the number
to call.
· The bank earns a referral fee for each
approved lease. The standard fee is 4 percent, he
notes, but can vary. To be competitive, the bank
may get a smaller fee on larger transactions. For
example, on a $200,000 transaction, the fee the
bank gets would be in the 2 to 3 percent range.
“On average, our referral fee is closer to
3 percent,” he says.
· The bank monitors lease activity and
customer service. Erickson receives monthly
reports from the vendor, which include
information on leases funded. Other reports
detailing applications in process, applications
rejected and approved, and payment history are
accessible on the vendor’s secure Web site, he
notes.
While credit risk is not a problem for the bank
in this program, he says there could be a
reflection on the bank if there were customer
service problems. However, feedback from
customers and officers shows the vendor provides
good service.
· Collections are handled by the vendor.
So far, none of the leases with the bank’s
customers have had delinquency problems, he
says. Since the leases are through the vendor, it
would handle any collections, but would notify
the bank in advance before taking any action, he
notes. The bank could then determine what
impact, if any, this might have on the customer’s
banking relationships.
· Incentives are offered to the bank’s loan
officers. Last year, the bank paid lenders
25 percent of the fee to the lender who referred a
lead that resulted in a funded lease transaction.
According to a representative from U.S.
Bancorp Business Equipment Finance
Group-Bank Services, financial institutions in
this program pay a commitment fee, which is tied
to the number of customers the institution
provides from its database.
Connection: Tom Erickson, Chief Credit Officer,
Anchor Bank, 1055 Wayzata Blvd East,
Ste 219, Wayzata, MN 55391;
phone (952)476-5239; fax (952)476-5243;
e-mail .