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25 Nov Should I Use a Business Loan Broker or Not?
The matter of when to use a business loan broker is a common issue for small business owners. Finding the right loan for your business can be complicated. You have to think about terms, your financial risk, and your readiness for debt. Brokers can give you specialized expertise to help you in your search.
But while brokers are often helpful for small business owners, the service can feature some unseen costs. As brokers typically arrange commission deals with lenders, limiting broker fees for borrowers, the expense is hidden deeper within the business.
What Do Business Loan Brokers Do?
Like other brokers in other industries, business loan brokers serve as an intermediary between a customer and a lender. They advise you on the lending market, research potential lenders, make recommendations on loans that could work for you, and negotiate the final deal on your behalf.
While the broker does all of this work in your place, the broker doesn’t work for you. This is part of why choosing when to use a business loan broker can be difficult. The broker is paid commission on the loan, not typically paid by customers.
What Are the Benefits of Working With a Broker?
When it comes to choosing whether or not to use a business loan broker, it helps to start out thinking about how the benefits align with your needs. Key advantages offered by brokers include:
• A deep understanding of the lending market.
• A willingness to advise on loan types that may fit your business.
• An ability to do the legwork of researching lenders and understanding their unique attributes.
If you are new to the world of business loans, or really don’t have time to research on your own, then it may be a good time to think about using a broker. That said, don’t make up your mind about when to use a business loan broker until you’ve considered the major downsides of the relationship.
What Concerns Come With Using a Broker?
The primary issue that stems from working with a broker is the incentive system in the market. A recent report from Nav sums the situation up well, highlighting that brokers are paid commission on the loans that are eventually signed. This gives them more incentive to connect customers with larger loans that will be more profitable. A broker won’t necessarily be motivated to get you the best loan. Instead, he or she may lean toward getting you a workable loan that is more profitable in terms of commission.
As such, thinking about when to use a business loan broker often comes down to the specifics of your situation. There are times where the benefits outweigh the risk. But ultimately, if you know what you need, it is often better to go it alone.
When to Use a Business Loan Broker
If you have never received a business loan and are completely new to the lending market, a broker can help you get up to speed and find a trustworthy lender. But once you have some idea of what you’re getting into, it can be beneficial to skip the broker and look at the market for yourself.
Nobody knows your business quite like you do, making you the best person to assess your needs. Alternative lenders like QuickBridge make this process even simpler. We offer small, short-term loans that reduce risk for all parties by keeping the debt manageable. We also offer sound advice and work to maintain an ongoing relationship with our customers as more funding is needed down the line. For more information on small business lending options, visit our website.
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