Assesing Business Loan Brokers

A business loan broker has contacts with numerous lenders and can help you find and qualify for a competitive business loan. Many small business owners use a business loan broker when they are having trouble finding financing. Some brokers will take advantage of your need, so consider the following five points before moving forward.

Before You Meet

First, deal with a business loan broker that you can meet. E-mail or surface mail solicitations are red flags. Business loan brokers have relationships with lenders and relationships with clients. They need to know you, your business and your financials to get the right loan for you.

Second, check with local associations such as the Better Business Bureau and the chamber of commerce. The state Secretary of State or Commerce will regulate brokers in your state and have a database of complaints. Only deal with a business loan broker who has a good reputation in your community. 

Checking Assets

Before allowing you to borrow, every lender will want to know about your assets to ensure you can repay the loan. When dealing with a business loan broker, you need to know the same in reverse. What is the capitalization of the lenders with whom he does business? Can they deliver on what is promised? What is their reputation?

Be certain to ask what relationship, if any, the business loan broker has with lenders. You want a business loan broker looking for the best and most appropriate deal for you.

Ask for References

Before starting a relationship with a business broker, ask for local references from both borrowers he has helped. It will be particularly beneficial if the references are from businesses in your position. If you are a small or startup business, talk to a small or startup business.

Services and Cost

Typically, if you can get financing on your own, you’re not using a business broker. Why pay the fee for a loan if you don’t have to?

Ask your business loan broker what the plan is for getting you a loan. How will the broker address the specific challenges you have such as a poor credit history or no credit history. What services does the broker provide?

It is very important to get a full breakdown of fees the broker will charge. And you should never pay a broker before a loan is completed.

Signs of a Scammer

What out for the following items as they indicate a business loan broker you should avoid:

  • Soliciting by e-mail or surface mail saying they can help you before knowing anything about you.

  • Guaranteeing you will get a loan.

  • Requiring payment in advance. This is particularly true for mail solicitations requiring that you send money in before doing business.

  • Suggesting you fudge numbers on your application or act dishonestly in any way.

  • Promising what appears to be unreasonably good interest rates or loan terms. If it sounds too good to be true, it probably is.