What Is a Business Loan Broker?

A business loan broker acts as an agent between a lender and a party seeking a business loan. The broker does not initiate the loan, provide financing or even underwrite the loan documents. The broker is simply a servicer to connect the two parties.

Benefits of Using a Broker

Businesses hire business loan brokers when they have unique needs or circumstances that require highly specialized loans. Rather than seeking out lenders themselves, they use brokers to contact potential lenders and negotiate on their behalf. Since the brokers bring multiple deals to the lenders each year, some lenders are more willing to negotiate with a broker than with an individual client. 

Downsides of Using a Broker

A broker collects a fee with each loan placed. This can be a flat fee or a commission based fee agreement. In either case, it is only beneficial to use a broker if the amount of money saved by employing the broker is greater than this fee. For most small businesses, this is not the case. Business loan brokers are a better bargain for large companies taking large commercial loans where a small percentage point difference can result in a high degree of savings.

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