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What Is a Business Loan Broker?

business loan broker

Like other brokers, a business loan broker connects people and products. Just as a mortgage broker assists in finding the right home loans for home buyers, a business loan broker (also called a ‘business finance broker’) helps business owners get business finance that fits their requirements. Here we’ll examine what business finance brokers do and how they can assist businesses in getting business finance.

What does a business loan broker do?

A person in this role will assist business owners and managers in getting finance. The first step in helping a client is determining their needs. With a wide range of commercial finance options available, it’s essential that the broker understands the business situation and reason for seeking loan options. Based on the reason for seeking the loan, the business finance broker can offer a range of options, including.

  • Cash flow loans
  • Bank term loans
  • Equipment finance
  • Commercial property loans
  • Business lines of credit
  • Invoice factoring
  • Invoice financing
  • Merchant cash advances
  • Short-term loans
  • Online business loans.

Another factor that a business loan broker will consider is whether the client is better suited to a secured or unsecured loan. If the small business owner does not have collateral, usually in the form of residential or commercial property (or does not want to use this as collateral), an unsecured loan will be the most appropriate option.

In Australia, professional associations representing professional finance brokers include The Mortgage & Finance Association of Australia, The Finance Brokers Association of Australia, and The Commercial & Asset Finance Brokers Association of Australia.

How do business finance brokers learn about the options available?

Business finance brokers will usually work with a panel of lenders that offer a range of finance products. For example, if their client is seeking equipment finance, the broker will communicate with several lenders to determine what they can offer. Based on the client’s financial situation and requirements, the panel lenders will respond with loan offers. The finance broker will compare these offers and consider factors such as interest rates, loan durations, and terms and conditions. These factors will be discussed with the loan seeker when comparing business loans. An experienced finance broker will have seen many situations and should be able to help the client choose the right finance solution.

How do business finance brokers get paid?

Business loan brokers will get a commission for the business loans that they successfully facilitate. This is usually a small percentage of the loan amount. For the finance broker, the commission covers the cost of running their business, including paying overheads and salaries. When working with a business finance broker, the small business owner does not pay more than if dealing directly with the financial institution. This is because the commission is included in the cost of the loan. From a lender’s perspective, the business finance broker helps market its products and spends time working with borrowers. This decreases the work the financial institution needs to do, so it is able to pay a fee to the business loan broker for doing all the legwork.

From the borrowers perspective, the broker helps save time by knowing the most appropriate loans to offer and presenting options for comparison.  

New tool to help business finance brokers compare business loans

An increasing number of finance brokers have been offering unsecured business loans from fintech lenders. Companies such as Moula use leading-edge technology to streamline the loan approval process. Instead of completing stacks of paperwork and waiting weeks for a response, bank and accounting data is safely and securely analysed online.

Moula was instrumental in developing a loan comparison tool call  Smart Box which enables business loan brokers and borrowers to compare business loan options. Smart Boxmakes it possible to compare important business loan elements such as the total cost of credit, average monthly payment and the total repayment amount. Learn more at What is SMART Box™ and How Does It Help Small Business Owners?

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All the thoughts, ideas and musings from the Moula team! Covering everything from work/life balance to general finance tips plus everything in between!

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