What You Should Know When Working with a Business Loan Broker

If you've never navigated the business loan process before, then working with a business loan broker may seem like a terrific idea. And in some instances, it certainly might make sense for your company. However, you want to be cautious about who you work with and the type of dynamic you establish with the said broker.

Obviously, you want to work with a broker who's got your best interests at heart and is thus willing to negotiate for you. Does the broker have ample experience, particularly with your industry and the types of loans you're considering? What fees are associated with their services? Is a commercial loan broker the best channel for your funding needs? Below we will break down the pros and cons of working with a broker in procuring a business loan. Having all the information beforehand really is critical to finding a funding solution that makes the most sense for your small business.

Business Loan Brokers & What They Do

A business loan broker is basically a third-party entity who works with small business owners to help them find the best loan options available. Think of the broker as the middle man between the business and the lender. They are independent of a bank or lending institution and most generally work for the business owner trying to attain that commercial loan.

The value in using a business loan broker is that they, in essence, do the legwork for you. So, it is their job to find the most suitable loan for your company; they will negotiate on your behalf, they will simplify the loan process and break it down so that you comprehend all available options. Not to mention, come application time, they will also help you with the paperwork and requisite documentation.

The Benefits of Working with a Loan Broker

We will get to the downsides of working with a business broker, but it is important to be aware of all angles. There are certainly benefits to doing business with a broker in seeking a commercial loan.

• They are experienced when it comes to negotiations and can do so on your behalf.

• They save you a great deal of time. They do the searching, the applying and the bulk of the legwork so you can focus on your company.

• They generally have solid industry contacts.

So what about the cons of going with a business loan broker…

• They do cost more. Therefore you have to carefully weigh this in terms of your overall budget.

• There is no guarantee; in other words, you may not be getting the best loan with the best rate in working with a broker.

• If they have established relationships with lenders, they could guide you in this direction regardless of benefit to you.

Finding a Loan Broker

If you do decide to go the broker route, you need to understand the there is a process involved with finding that broker. Again, the more informed you are, the better off you'll be.

First off, you want one who is at least somewhat familiar with what you do—this way they'll have a better understanding of what types of loan products would work best for you and your business. They'll also be more conversant with the application process as a whole when it comes to your specific industry.

You want to generate a list of potential brokers and from there narrow it down by studying their bios, their resumes, their backgrounds. Upon devising your short list, it's time to actually meet with the brokers. Establishing a rapport with a broker is important and should not be taken for granted. You can tell a great deal just by talking to someone as far as how you fit with them and how you might work together.

Trust, especially when it comes to financing, is critical. You want to choose a broker that you feel comfortable with and subsequently find trustworthy and credible. And that goes both ways. After all, they are vouching for you in terms of your ability to pay back the loan.

What Questions Should You Ask A Broker?

When interviewing potential brokers, there are key questions you want to ask in order to get a better handle on their personality, way of doing business and prospective ability to work well with your organization. Below are a few questions you definitely want to ask in your initial talks with potential brokers.

How many lenders will get my application?

Again, here is where you want to ensure that the broker isn't married to a single lender. You want them to submit your packet to multiple lenders in the hopes of finding that perfect one for your company.

When do I have to make a decision?

You don't want to be rushed. A good broker will have no problem waiting for a bit in order to allow you to gather all of the facts and make an informed decision.

Do you have a privacy policy?

Remember, you're submitting some very personal and sensitive information. What will the broker do with this? If they are apt to sell it off to third parties this is certainly one you want to stay away from.

What costs are associated?

Of course, they're going to have their costs/fees. A good broker will tell you up front what those are. Amounts are going to vary based on location, size of the firm, your requirements, among other factors. Generally, they will either ask you to pay up front, bill you after, or factor the fees into your borrowing agreement. Having a thorough discussion about this aspect of the process in the beginning stages is crucial.

Some Red Flags to be Aware of…

Transparency is everything. If you suspect that a broker isn't being completely honest and clear with you during the initial phase, then look elsewhere. Some things that a broker might say/do that you should be wary of…

They Guarantee You Will Get a Loan

There is no guarantee and they cannot with absolute certainty know that you will get a loan. No broker should make such a claim.

They Offer No Client References

Or also a lack of reviews could indicate there is something wrong. A legitimate broker should not be fearful of giving you contact info for past clients and pointing you to some verifiable reviews.

They Do Not Require a Credit Check

In order to see if you can potentially qualify for a loan, they need to know credit score. Insisting they don't need one may just be a ploy to lure you in.

You really do want to make sure you look at all relevant facts before deciding a/) whether or not to use a commercial loan broker and b/) which broker to use. Especially as a small business, you cannot afford to make costly mistakes. If you are looking for a lender, First Union is perfect. We have multiple loan products that will benefit your business. Call today to find out!