How to use a business loan broker to find the right loan for you.
If you are struggling to run your business while trying to find external funding, a business loan broker could be something to consider. A broker can help choose the right financing option for you across a panel of business lenders. This guide will take you through some of your business broker options and tell you what you need to know.
Compare the business loan brokers below
What will a business loan broker do?
Business loan brokers can operate either online or as part of a branch network. Either way, you submit an application and the broker will provide you with a range of loan options from its panel of lenders. Since you've already provided information such as your turnover, time in business and loan needs, the loan options should all be suitable to what you're after.
You can then sort through your options and choose the loan you want to apply for. The broker can guide you through the application process right up to funding.
How much does using a business loan broker cost?
Rather than you paying the broker a fee, most business loan brokers are funded by the lender as the loan is repaid. Often this will be a figure between 1% and 3% of the total loan amount, but it can be higher. Make sure you are aware of the full brokerage costs before you agree to sign on to a broker's services.
How do I compare business loan brokers?
There are a few business loan brokers available so make sure you compare your options before you apply. You can look at:
- Approval rates. Some brokers may have higher approval rates than others.
- Personal service. If personal service is important to you, for example a dedicated broker on your account, then check the brokerage offers this.
- Fees. Does the broker charge additional fees on top of the loan?
- Lending panel. Many brokers outline some of their lending panel before you apply. Have a look at the breadth of the panel and see if the lenders would suit your needs.
- Type of business it services. Does the broker specialise in a particular type of business or industry?
What you should look out for with a business loan broker
A business loan broker is there to help take some of the pressure off you and to assist in making an important decision that should ultimately save your company money. Keep an eye out for any of the following signs when choosing a broker or working with one.
- Additional fees. The broker will be paid by whoever supplies your loan so they should not be charging you additional fees. If you are being hounded for upfront payments and commissions, it might be time to find a new broker.
- Difficult to contact. A broker should have at least one free-to-call phone number. Toll-lines and rarely-checked email inboxes can cost you time and money.
- No experience. The best business loan brokers have knowledge and industry experience built from years of finding loans for their clients. At least some of this will be documented online, so be sure to check before you engage their services.
- Bad credit marketing. Promises of guaranteed loans can be appealing, but be wary of brokers who disregard credit scores. You could end up paying exorbitant interest rates on a loan that was found quickly with little thought for the needs of your company.
- No references. A quality business loan broker should be able to give you the details of previous customers who can offer you insight into their experiences. Working with a company that has zero testimonials is always a risk.
How can I make sure I get the best service possible?
The key to successfully utilising a business loan broker is to provide as much information as possible about your company. Cash flow projections, company history and aims for the loan can all help a broker guide your business into the right loan and make sure you come out stronger on the other side. You should also make sure the broker works with a range of lenders.
Online business loan brokers
If contacting a physical broker doesn't appeal to you, the other option is an online service. These websites bring several lenders together in one place, allowing you to compare them and easily contact the ones that best suit your business. This can be extremely efficient, though some business owners may prefer the benefits of communicating with an expert broker in person.
Before deciding on a business loan broker, take the time to consider your options and find the person who best fits your needs.