A business loan broker acts in the same way as a mortgage broker or any other brokerage firm. They act as an intermediary between the people seeking loans and the loan providers. They will collect information about your business and, once you have approved, apply for small business loans.
What Benefits Can A Business Loan Broker Add?
1. Expert Knowledge And Relationships That Last
Business loan brokers can help business owners navigate the loan market. They can also use their relationships with lenders to recommend the best loan providers for each business, including a poor credit business. They must be able to identify which loan providers are most likely to approve a business’s application, and not waste time contacting those who aren’t a good match.
A business loan broker can help you if you are a small business owner and only know about a standard loan. We will ensure that you get the best product for your needs.
A good broker can speak with a greater number of loan providers than you might do directly, saving business owners time and effort in applying for multiple loan providers.
2. Both Banks And The Designated Loan Providers Should Be Involved
Good brokers will have strong relationships with banks if you prefer to use a bank over the many specialist loan providers available in Australia. They will handle the lengthy bank application process for the business owners. You must have a good credit score to be able to apply for banks.
3. Higher Rates Than Going Direct
According to the theory, since the total amount that the broker has obtained from banks is greater than one single application, they should be eligible for a lower loan rate. This doesn’t include the high fees that the broker will charge.
What Does A Business Loan Broker Charge?
A typical business loan broker will charge 7-17% for the total loan value. Transparency is key. The broker should be able to inform you about the interest rate and markup provided by the loan provider. If a broker is unwilling to give you a breakdown of their rate calculation, they are likely looking to charge unreasonable fees.
The fee is usually included in the cost of your business loan, but you might have to pay the broker separately. Commercial loan brokers will only charge you if your company has been approved for a loan. Others may charge fees even if they are unable to match you with a lender.
Can You Trust A Business Loan Broker?
Recently, some of Australia’s top business loan companies were recognized for their 2020 performance. Clients praised the breadth and depth of the financing options that brokers we’re able to offer. One broker provided a cost-benefit analysis to their client after comparing more than 20 funding options.
It is important to remember that protection for SMEs in small business loans is lower than the protection provided to consumers with personal loans. To educate SMEs before they take out business loans, the ASIC makes this clear. The regulation of small business loan brokers is less than that of loan providers. As a broker between you and the lender, you need to ensure that they are acting in your best interest. You must be aware that loan brokers are motivated to maximize their profits. They may make a recommendation because it is best for your company or because it makes them more money.
Small business loan brokers will undoubtedly receive different incentives from lenders to continue pushing clients their way. Brokers who are getting better benefits from one lender may recommend that you choose that lender, even if it isn’t the best for your business.
Scammers posing as small-business loan brokers are becoming more popular. This is especially important for business owners. Scammers posing as loan brokers will often ask for an up front processing fee. This is the most common con. Many times, they will offer 0% interest from several providers. None of these offers will be followed and you won’t hear from them again once you have paid the upfront fee. You may have shared information about your bank account and business.