16 Oct Dispelling 5 Myths About Business Loan Brokers
The noise about business loan brokers can be like driving through a fog. It’s easy to get turned around in a mist. And the rumors, second-hand experiences, and strong opinions about brokers can leave you feeling lost and unsure about these lending professionals.
But just like a light reveals a path in the fog, we can dispel the myths about commercial loan brokers to see your business’s way forward. Consider the facts about the following five myths and determine if working with a broker will help you along your way.
Myth #1: You Don’t Need a Broker, They’re Just Middlemen
This myth gets tossed around a lot. People assume you can go directly to the lender to secure the same funding without working with or paying a broker. But brokers leverage their connections and experience to arrange commercial loans beyond the reach of average business owners.
Brokers build relationships with multiple lenders, including niche, alternative, and private funders who don’t advertise publicly. Like a matchmaker, they try to connect you with the best lender and funding option for your needs. And because brokers and providers consistently work together, a broker can secure more competitive and flexible terms for your business loan.
Myth #2: Brokers Are Too Expensive and Increase Loan Costs
Cost is a big holdup for most business owners, for good reason. You’re already looking to borrow capital; you can’t afford to throw money away. However, using a lending agent doesn’t increase your interest rate, and a broker’s payment is often worth it for the value you get in return.
In many cases, your savings outweigh a lending agent’s cost. Let’s say you use a nonbank broker for debt refinancing. Combining your debt obligations into a single loan reduces your monthly payments by about 30%. With only a 6% success fee going to the broker, the savings more than pay for the costs.
Look for brokers with transparent fee structures. Reputable brokers will tell you about their compensation and never ask for upfront payment. They may earn a commission from lenders or charge you a flat fee or percentage once you’ve successfully secured funding. You always have the right to ask and evaluate if the cost is worth it.
Myth #3: Brokers Are Just Salespeople Out For Commission
You might have heard of brokers who didn’t explain loan terms or pressured owners into accepting a deal that didn’t feel right, but every industry has a few bad apples. Commercial loan brokers are generally knowledgeable and focused on meeting your funding needs.
Loan brokers usually have degrees and previous experience in finance. They understand industry best practices, underwriting standards, lender risk appetites, and funding products. They’re not random people recruited to sell loans. They’re lending professionals.
Brokers use their expertise to find funding solutions for their clients, even in complicated situations. Many act more like consultants to help you assess your goals, review your financials, find the right funding solution, and advise you on next steps. Their business relies on good relationships between leaders and borrowers, so it’s in their best interests to act in your best interests.
Look for brokers with positive customer reviews and relationship-oriented customer service. These professionals take the time to understand your business, communicate clearly about your financing, and prioritize your long-term success over short-term profits.
Myth #4: You’re Not Desperate Enough to Need a Broker
Brokers help owners in financial crises and high-risk enterprises that traditional lenders would turn away, but those aren’t their only clients. Brokers offer value to any business owner looking for funding.
Many successful small businesses and established high-revenue companies use loan brokers to streamline their financing. Brokers find lenders specializing in your industry, compare loan offers for you, access exclusive financing offers, and negotiate better terms.
Even if you have a strong balance sheet, a broker can bring greater efficiency and guidance to your search for a loan.
Myth #5: Brokers All Offer the Same Deals
This myth reveals that brokers provide value in every funding situation, but falls short regarding the personalized experience brokers offer their clients. Each broker offers different financing opportunities based on their lender network and expertise.
Business loan brokers rely on a broad network of banks, credit unions, fintech lenders, and private investors to connect their clients with high-quality funding options. Each broker establishes different connections and has different access to financing.
Brokers also bring their individual experiences to their lending companies. They specialize in industry niches, borrower profiles, company stage of growth, loan types, business locations, and even funding purposes.
For example, you might need business loans to purchase a business. A commercial loan broker specializing in mergers and acquisitions (M&A) will offer personalized deals. They have connections to financiers and expert insights into funding products to stand out from other brokers.
What You Really Get With a Broker
You get a knowledgeable guide and invested partner in a trustworthy broker. They help you save time comparing options and applying for loans, gain access to a broader lender network, access expert insight on financing products and terms, and present your business in the most favorable light.
Once you’ve dispelled the myths around these lending professionals, it seems like a clear path ahead. After all, would you rather navigate the lending world’s fogs and roads alone or move forward with an expert loan broker guiding you?
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Commercial loan brokers are frequently misunderstood, with persistent myths causing hesitation among business owners. This infographic debunks five common misconceptions and reveals the real value brokers bring to the table.
