Too busy to explore the loan options available to your business? You can ask for the help of business loan brokers. Learn more about them here.
Business loans are a necessity for any growing business. However, navigating the different business financing options can be an overwhelming undertaking for small business owners who already have a ton on their plate. Luckily, business owners can employ the help of business loan brokers to find and get the best business loan option for them.
A business loan broker’s work is similartothat of a real estate broker. Instead of finding you the best deals on properties, business loan brokers help you findthebest funding optionsfor your current business needs.
In this article, we’ll break down all you need to know about business loan brokers– the advantages and disadvantages of working with them, and whether or not you need one.
What is a Business Loan Broker?
A business loan broker specializes in helping business owners find the best funding options. They will first assess your company’s financial health and work with you to identify exactly what your needs are, and then go out and find different funding options that best fit those needs. Typically, brokers have an established network of business loan providers whom they can connect their clients with.
A person with a GED or highschool diploma could become a business loan broker. However, having a four-year degree in business, accounting, economics, and finance can go a long way in establishing a loan broker career. The knowledge from these courses helps make it easier to analyze financial statements, understandbetter loan terms, and negotiate lucrative deals.
Business loan brokers make money through a commission on the loan they find you, should you be approved for it. Others may also charge you directly for their services.
Advantages of Working with a Business Loan Broker
If you decide to take on the loan application process on your own, it will fall on you to research and explore all the different loan options floating around out there, and there are a lot. The process can actually be quite labor intensive. You’ll have to find the right lender – a challenge in and of itself – and then compare loans options, negotiate loan terms, understand the fine print, and more.
If you’re a business owner responsible for managing the ins and outs of a daily operation, you likely don’t have the time to give this process the due diligence it deserves. Unfortunately, if you cut corners, the only one who suffers the consequences are you.
Perhaps the biggest advantage of working with a business loan broker is that he or she will be there to do all the heavy lifting for you in the loan application process. Other benefits include:
1. Knowledge and expertise
There are a lot of business financing options available out there. If you have zero or little knowledge on the subject, going through the different choices one by one could be tedious, to say the least.
Loan brokersare extremely well-versed on all the different types of business financing. They’ll not only be able to talk you through the various financing types, but they should be able to narrow down the most suitable options for your business just by identifying what your needs are.
Any questions you have along the way, about the type of financing or the loan application process, they will be there to answer them and walk you through step by step.
2. Better loan terms
Once you decide what type of loan you want, business loan brokers will distribute your applications for it to different lenders. They do this to yield multiple offers so that you can compare them and choose the one with the very best terms. Plus, if you have an excellent financial background, your loan broker cannegotiate even better loan terms for you.
Without a broker, you’ll be limiting your options and could very well miss out on better offerswith bigger savings in the long-run. Business loan brokers can help you go through the rates and explain how they would work for each specific loan product offered to you. When you understandthe reasoning behind the rates, it’s easier for you to make an informed decision as to which loan option is the best fit for your business.
3. Fast-track loan approval
Business loan brokers have a strong relationship with funding companies. After all, they’re helping these lenders get more leads, and therefore, sales. That being said, they’re in a much better position to expedite the loan approval process so you can get your funds faster. However, it is worth noting that they may charge a higher fee for this service.
4. Smoother process
Perhaps the biggest advantage of working with a loan broker is that it saves a lot of time and effort. Again, if you’re just opening a new business or growing one, you’ll be handling a lot of different things at once. With a broker, you can avoid taking on the search for the right lender yourself. This helps you save a lot of time and effort which could be put to better use in other areas in your business.
What are the Downsides of Working with a Business Loan Broker?
As mentioned, business loan brokers can make money in two ways: through a referral fee from the lenders, or by charging you directly. Either way, you’re likely to spend more on the business loan application process if you work with a loan broker. You may also have to pay more if you’re looking for immediate loan approval.
Be sure to discuss a broker’s fees before deciding to work with them. Ask how they’ll get paid and how much they charge if they collect the fees directly from you. This will help you gauge whether you can afford to hire them or not.
2. Multiple Credit Checks
One common practice among business loan brokers is the “shotgun approach” where they send your loan application form to several lenders. In order to evaluate your approval, these lenders will run a credit check on you. Multiple lenders means multiple checks. Some may even run a hard credit inquiry, which can affect your credit score and hurt your chances.
Ask the broker which lending companies they plan to send your application to, and if they can find out whether the company will be running a soft or hard credit check on you.
Final Thoughts: Is it Worth Working with a Business Loan Broker?
Finding the right and affordable financing for your business can be challenging, considering the overwhelming number of loans available out there. Ultimately, the choice of whether you’ll employ the help of brokers or not depends on your needs.
If you prefer to do the entire process alone, then, by all means, feel free to do so.If you don’t have the time to sift through the different business loan options and don’t mind paying extra for broker fees, working with a business owner would make the process smoother.