A journey of 10 years can take you 6 months if you find someone who has gone through the journey to put you on the way; so is the role of a broker in the small business loan application and journey.
Your business is broke and you turn in between looking for money and making sure the remaining part of the business stays afloat. These are two big responsibilities either of which cannot be neglect.
Why not leave loan chasing for those whose job is to chase loans while you focus on making your company the best at what they do. That is where loan brokers come in. They make your loan application seamless. I am sure you want to see how useful loan brokers can be; true or yes?
Who are business loan brokers?
Small business loan brokers are those individuals and firms that analyze your financial data, explain all loan programs and financing options available to the small firm, prepare an SBA loan package to match the lenders.
What loan brokers do is that they find lenders that are compatible with the borrower and send applications to them. It saves a small business a lot of time as these brokers have information readily available and they have relationships with lenders over years.
The brokers also charge for their services either directly or they factor in their charges in the loan; that is a certain percentage of the loan will be the brokers’ charges.
Business loan brokers types
Loan brokers have different areas of specialization. What some are vast in, some are less vast in them.
This leads to a scenario where a business owner needs to determine the type of loans they want so that they can hire a broker accordingly.
This will help them to save time, energy, and money.
1. Loan brokers for SBA
These are loan brokers that specialize in small business administration loans. SBA has specific requirements and thus borrowers find it difficult to comply.
Brokers however are very familiar with these requirements and they can help you choose which one you are qualified for.
2. Loan brokers for startups
Many new startups require funding in their businesses and the fact that they are just coming up means they do not know where to look for in terms of loans. Viola!
Brokers can help you find long-term and short-term loans that you are qualified for.
3. Commercial loan brokers
These are the ones that operate with the traditional banks. They find loan options you might be interested in in the banks and have readily available information on them. You should consider hiring a broker if you want this type of loan.
4. Factoring brokers
They look for lenders who will lend you money in exchange for your invoices in which other companies are owing to you.
Instead of you running up and down because your debtors have refused to pay, you can hire a small business loan broker to find a lender that accepts unpaid invoices.
The terms and conditions are discussed between the three parties as regards the loan interest and the brokers’ charges.
This is another small business loan broker.
5. Merchant cash advance broker
Business with bad credit score but good cash flow has a chance at getting loans from alternative lenders who look more than credit scores.
I mean if you are good at your finances and you have good cash flow, you are quite bankable; but you don’t know who will want to bank with you.
Guess who knows? Brokers! They can find your messiah for you in the messy financial market.
6. Equipment financing
Businesses with the need to purchase equipment without the available cash tend to seek for loans to get the machines.
Some lenders are willing to give out money if you want to use it to buy equipment as they believe the equipment will be used to make products that will bring in revenue.
You can hire a loan broker whose specialty is just that.
The big seven: Tips to Choose a Loan Broken
To choose a broker, some questions cannot be left unanswered. They include:
- Cost of Loan: it is good to find out the total cost of your loan from a broker before getting into an agreement with them. Some brokers get you a loan with a high servicing rate due to the amount they charge for their services; for instance, a loan with an original interest of 12% can become 27% because the broker is charging 15% on the loan and the lender, in turn, add the 15% to the burden of the borrower. True cost should always be figured out.
- Visibility: are you placing my application in front of many lenders or you are directing me towards certain lenders? Brokers should place you apply to multiple lenders in the hope to receive multiple offers with which you can now compare and make your choice. If a broker is not giving enough visibility nor making attempts to, it is advisable not to work with such a broker.
- Service charge: do some lenders pay you more than other lenders? It is important to know if there are payment discrepancies among lenders because some brokers can offer a high percentage service charge for a broker with the intent to bring more qualified clients to them. If a broker falls into this category, it is a red flag.
- Privacy: does this lender guarantee your data privacy? Many brokers have been found guilty of selling information to whosoever pays for them. It is a breach of privacy and you should be sure a broker signs a confidentiality agreement before hiring them.
- The downside of the loan: there are always two sides to a coin and if your broker is not saying both sides, it is wrong. You need to discuss the negative side of the loan like the interest payable, the penalty among others. Reason being that not all loans are favorable and the last thing you want to do as a struggling business or one that needs funds badly is to incur more than the necessary burden.
- Can I decide later: offers from lenders should wait and be thought over before deciding to accept. This will help you to grab more information about the loan. However, if your broker seems like someone that is always in a hurry, then not having business with them is the best option because they could hasten you into wrong decisions.
- Training: Several organizations specialize in brokers training and licensing. It is imperative that your broker is licensed and well trained so that you can be sure of who they are. Dealing with brokers without proof of address and certification can expose you to fraud.
Brokers you should not sign with
A broker should have some basic information presented to you as that will form their basis of Genuity with you.
- Contact address: a broker should readily make available their contact address such as their phone numbers, physical office address, their professional email address among others. This shows the level of seriousness they put in their work and the intensity of work you should expect if you hire them. Someone without a professional email is quite unserious and should be avoided.
Some lenders have made name for themselves in the financial market and it is alright to look into them so that you can start your journey from the best of them.
|1.||Gokapital||High-risk industries lending|
|2.||Biz2credit||Traditional and non-traditional lending|
|4.||LendingTree||Compares offers for well-qualified borrowers|
|6.||National business capital||Short term to long term loans|
FREQUENTLY ASKED QUESTIONS ON SMALL BUSINESS LOAN BROKERS
A loan broker, or a mortgage broker, is the middle man/woman in between a lender and a borrower. While a borrower can directly borrow from a lender, a loan broker can help the borrower decide which lender meets the borrower’s financial goals. Their fee can be charged to the lender, but sometimes is charged to the borrower.
Learn how banks assess you. Know the factors to creditworthiness.
Decide what type of loan or long-term financing you need. Not all loans are the same.
Decide on the lender
Determine your chances of getting approved.
Gather your documentation.
Fill out the application.
Build personal and business credit scores. Personal credit scores indicate your ability to repay personal debts, such as credit cards, car loans, and a mortgage.
Know the lender’s minimum qualifications and requirements.
Gather financial and legal documents.
Develop a strong business plan.
SBA loan brokers are proficient in all the SBA loan programs allowing you to focus on running your business, rather than researching the various programs. Good SBA loan consultants and brokers can analyze your business financials and offer expert advice as to which programs would be the best fit for your company.
A needle in a haystack is better left alone as the work will be too tedious to do, however it becomes super easy when you introduce a magnet. That is a practical example of you looking for lenders yourself and hiring a broker to do it for you.
Although it comes at a cost, it is well worth it to spend your time elsewhere rather than to try to save money.
Brokers have the information you need and you are not the first person in their front for such an issue. Or are you their first client? Please kindly find another experienced broker!
I hope you still remember why you need a good broker and how to spot one, if not kindly go up and check again, it is just a few lines.
- Forbes: Small business loan broker
- Fitsmall business: best business loan brokers
- Fundera: small business loan broker
- Nav: what are a small business loan broker