How to Successfully Select a Small Business Loan Broker
It may take you considerable time and research to find the ideal business loan for your unique needs. Due to this, you may benefit from working with a knowledgeable business loan broker.
Once they understand what you hope to accomplish with a term loan, they can do the heavy lifting for you. You can count on a business loan broker to help you find the best lender and business loan for your specific situation.
In this blog post, we’ll review what you should consider before you move forward with a business loan broker.
8 Factors to Consider When Selecting a Business Financing Broker
Before hiring a loan broker, we suggest looking into their educational history. Maybe they have a college degree in finance, or perhaps they’ve earned certifications like the CFA, CFP, or CPA.
While education isn’t everything, it can give you a good idea of what a loan broker may or may not know about business funding. Ideally, the broker you choose should have some type of formal education.
Some loan brokers are more experienced than others, so you should always ask a broker how long they’ve been active in the financing industry.
If they’re new to small business loans or only have a few years of experience under their belt, you may opt for a senior-level broker instead. It’s likely that someone with more experience has developed stronger relationships with lenders and can therefore provide you with better options.
3. Industry Specific Knowledge
There are many brokers that specialize in providing funding to specific industries. If you’re in manufacturing, for example, it may make sense to work with a broker who has expertise in financing for manufacturing businesses.
A broker with industry specific knowledge will have a greater understanding of how your business works and what you may do with the funds.
4. References and Reviews
Even if a small business loan broker tells you they’ll do a good job, it’s essential to read reviews and call their references.
Objective, third-party opinions and feedback are far more valuable as many brokers will say anything to secure new business. Positive reviews and references may make you more confident in your decision or steer you toward another professional.
Just like any other financial professional, a business financing broker deserves to earn money for their work. However, this doesn’t mean you should pay any fees they impose on you.
If a broker asks for an upfront fee, run the other direction. A legitimate broker won’t ask you for any money before they find you a loan; instead, they’ll charge a success fee at closing. If your business loan offer doesn’t close, you shouldn’t be required to pay any fees for applying.
When you work with a broker, you’ll need to share your personal and financial details. Find out how they will keep this confidential information safe.
Most business loan brokers will invite you to a secure portal, which you can use to upload documents and complete applications.
If a broker doesn’t seem to have any security measures in place, you should probably find someone else. Otherwise, you risk your private information being sold to third-parties.
7. Solid Online Presence
In today’s digital era, an online presence is crucial for all types of professionals, including brokers. A quick Google search of a broker’s name should reveal a website, reviews, and potentially social media outlets. If you can’t find any information about a broker online, they probably lack a good track record in the financing industry.
While most small business loan brokers don’t work round-the-clock, reputable ones make themselves available to their clients. It’s important to hire someone who will be there for you to answer questions, provide status updates, and address any concerns you may have. They should give you their email address and phone number so you can reach them whenever you need to.
The Benefits of Working With a Small Business Broker
Now that you know what to look for before you commit to a business financing broker, let’s dive deep into the benefits of one. While you can find a business loan on your own, you may enjoy these perks if you work with a broker.
1. More Small Business Financing Options
It would take you a great deal of time to do research and find the various lenders and loans that may meet your needs. Not only can a broker take care of this for you, they may open the doors to more options than you’d be able to find on your own.
2. Good Interest Rate
The interest rate you lock in will determine the overall cost of your loan. Since a broker can provide you with multiple loans to compare, you’re more likely to secure a good interest rate. Of course, factors like your credit score and time in business will play a role in your rate as well.
If you don’t have the best credit score, you can’t rely on a business loan broker to secure you a low rate business loan.
3. Quicker Underwriting and Approvals
If you apply for a loan on your own, a lender may take weeks or even months to review your application and decide whether to approve you. Due to their strong relationships with lenders, a broker can expedite the underwriting and approval process. If you need access to business financing as soon as possible, this is a huge plus.
Conclusion: Take Time to Consider Your Working Capital Options
Since the broker industry isn’t licensed or regulated, just about anyone can become a broker. Once you find a few brokers, make sure to consider the factors we discussed above. By doing so, you can ensure you work with a respectable, qualified professional and receive the best possible service.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.