01 Jun The Benefits of Using a Business Loan Broker
With this year’s NACFB Commercial Finance Expo soon upon us, we thought we would take a look at the world of the business loan broker.
We all know that getting funding for a small business can be hard work. It takes time to do all the research and analysis of what your business needs, then find a respectable lender, negotiate a deal you can live with, understand the terms of your financing, etc. The list really does go on.
That is where a respected and knowledgeable loan broker can really help, and not just in terms of saving you time and effort, but in more tangible ways such as the following:-
- Getting the best rate. Reputable brokers will submit your loan application to a selection of different lenders so that they can find the best rate possible for your financing. If you went straight to one lender instead, you’d never know if you could have gotten a better deal somewhere else.
- Explore alternative options. Even if your funding application gets denied by a bank or other mainstream lender a broker should be able to help you look into the alternative lending landscape – peer-to-peer for example.
- It’s their day job. The best brokers have relationships with an extensive network of lenders. They depend on good relationships and relationship building – and getting good deals is often all about having the right contacts.
- They have knowledge of the market. Terminology such as debt service ratios, Invoice financing versus merchant cash advances, Business credit versus personal credit should all be easily explained by a respected broker in language that you can understand. A loan broker’s area of expertise, unsurprisingly, should be loans — so your broker would ideally be able to explain all the jargon and acronyms to you without a problem, and navigate all the options out there to save you time and money.
However, finding the right loan broker is not always easy, and because of minimal regulation in the industry it is all too easy to get involved with a less than reputable operation. So to help small businesses we would recommend asking these questions of your prospective broker at the outset:
- What’s the total cost of the loan?
- What extra costs are you adding? Is the lender paying your cost, or am I?
- How many lenders are you referring my application to?
- What’s the downside of this loan?
- Will you sell my information to third parties?
- Can I take some time to consider?
- What is the cooling off period?
There is without question a lot more choice in the SME finance market than ever before, with the government actively promoting a flourishing alternative business finance sector in the UK. To make sure that you give yourself the best possible range of finance options, and protect your business from harm, do your homework before you chose a commercial finance broker.