Maybe you’ve heard of hiring a business loan broker. You may even know an entrepreneur who has used one to get their business the cash injection it needed. But do they work? And how does it all work exactly? The answer isn’t straightforward–however, this post will give you the lowdown on the positives and negatives of using a business loan broker.
Who is a Business Loan Broker?
A business loan broker is a person who links your business to a lender. In essence, they represent banks and lending institutions. Brokers or agents find clients by advertising or referrals from friends or acquaintances.
The broker is responsible for finding qualified applicants, screening them, explaining the loan details, raising the money, and handling the paperwork. Their fees usually range from 5% to 15% of the amount borrowed, though some brokers will waive this fee if they find you a loan.
Brokers have full-time jobs and are paid commissions by the loan originator. The loan originators are the banks or other institutions that lend money. Also, the loan originator, not the business loan broker, decides which borrowers are qualified and which loans to make.
The Roles of a Loan Broker to a Businesssearching for
A business loan broker can do many things for you. They can find loans for you and find funding that meets your needs. Brokers can help you find loans that fit your budget, a loan that you can pay back by a specific date, or products that give you the most of your money.
And that’s not all. These agents also save businesses lots of time. Usually, they handle all the paperwork and explain the loan details.
But there are some potential downsides of hiring loan agents. Some of them charge exorbitant fees. They can also make the borrowing even more costly if they misrepresent the loan product and lead to poor borrowing decisions.
Should You Use a Business Loan Broker?
There are good and bad reasons for using a business loan broker. Here are some questions to ask yourself: Why do I need a business loan? Do you have personal savings? Do you have commercial credit?
Do you have time to search for a loan? Do you have a good credit standing and a job? Are you willing to put all your eggs in one basket?
If the answer to any of these questions suggests that you need help approaching a lender, then hiring a business loan broker is probably a good idea.
Blair Thomas has been a music producer, bouncer, screenwriter and, for over a decade, has been the proud Co-Founder of eMerchantBroker, the highest-rated consumer financing enabler in the country. He has climbed in the Himalayas, survived a hurricane, and lived on a gold mine in the Yukon. He currently calls Thailand his home with a lifetime collection of his favorite books.