Why should you use a broker for business financing?

Why should you use a broker for business financing?

What exactly is a Business Loan Broker?

A Commercial Loan Broker (Business Loan Broker) helps small business owners by securing business financing through a network of lending relationships. Business loan brokers identify small business owners’ needs and then offer financing products to suit those needs. Business loan brokers usually earn fees from the referring source (lender or funder) not the small business owner.

A broker typically specializes in a variety of small business financing.

What are the differences between a Business Loan Broker and a Direct Lender?

A direct lender is a financial institution that makes loans directly to you. A Broker refers to direct lenders but does not fund or service the finance products themselves.

It’s good to deal with a Loan Broker because they can compare business loan products in the marketplace that match your need versus a Direct Business Lender who will only of their loan products .

What kinds of Lenders work with Small Business Loan Brokers?

  • Conventional banks
  • Long-Term Business Lenders
  • Equipment Financing Companies
  • Invoice factoring Companies
  • The Small Business Administration
  • Alternative Lenders
  • Hard Money Business Lenders
  • Commercial Lenders

What are the Advantages and Disadvantages of Working with a Small Business Loan Broker?

Advantages

  • A business loan broker has relationships with many lenders.
  • No upfront fees
  • Can provide many solutions, not just one
  • Saves time, energy, and the annoyance of comparison shopping 

Disadvantages

  • Could be a specialty broker that only focuses on some regions of brokering business finance products
  • No Federal or State agency directly regulates it. It’s crucial to look up the reputation of the broker you are working with. 

How to Find the Right Small Business Loan Broker

  • Evaluate the expertise of their product knowledge
  • Discover the variety of product offerings the business loan broker has at their disposal.
  • Ask how fast and efficient is the loan broker’s process. 
  • Check Reviews with third-party companies that don’t work directly with a business like the Better Business Bureau and Google. 
  • Cost or fees – Ensure all offers are fully disclosed with disclosures or term sheets at the time of submission. Request a copy of a loan agreement before signing anything.
Meet Janiece Rice, your expert business loan broker.

12 Caution signs when dealing with small business loan brokers

  1. Company Website – Do they have one? Is it updated?
  2. Physical Address – Do they have one? Is it a PO Box or shared co-working space?
  3. Company History – Do they have a bio? Founder history?
  4. No Independent Reviews – Do they have them?
  5. Access/Communications – How accessible are they? How responsive?
  6. Better Business Bureau – Are they listed?
  7. Any Federal, State, or Local Actions – Are they listed negatively?
  8. No Clear Fee Disclosure or Term Sheet – Can they provide one?
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