A business loan broker can offer you personalized help as you search and apply for small-business funding. But often, you’re better off using a reputable small-business loan marketplace or applying directly with the lender yourself.
How much do you need?
We'll start with a brief questionnaire to better understand the unique needs of your business. Once we uncover your personalized matches, our team will consult you on the process moving forward.
When to use a business loan broker
If you answer yes to two or more of the following questions, then consider using a broker to help you get a business loan.
- Are you applying for a business loan for the first time?
- Do you need a commercial real estate loan, SBA loan or business acquisition loan?
- Do you want to avoid searching for and comparing lenders on your own?
- Do you prefer a personal relationship with someone who understands your financial needs?
- Would you like help with submitting loan applications and general advice throughout the process?
Not all businesses will benefit from working with a business loan broker.
Established businesses may be able to qualify for competitive interest rates on their own. And some small-business owners may prefer to handle the application process themselves. Other businesses simply may want to avoid paying a broker’s fee.
Use the table below to compare the loan broker option with alternatives: using a business loan marketplace and applying directly with a lender.
Compare options for finding a business loan
Loan broker | Loan marketplace | Direct application | |
|---|---|---|---|
Best for: | First-time borrowers; specialized financing. | Startups; poor-credit borrowers. | Established businesses; strong-credit borrowers. |
Cost to you | Broker’s fee; ~1% to 15% of loan amount. (Sometimes the lender pays for the broker and not the borrower.) | Often free. | Free (though application fee may apply). |
Level of assistance | High: Your broker will personally guide you through the process, from finding lender matches to submitting your application. | Moderate: The online platform will match you with potential lenders based on your qualifications. You’ll complete and submit the application on your own. | Low: The lender can answer your questions as you complete your application. But you handle research, comparison shopping and application submission. |
🤓Nerdy Tip
NerdWallet can help you find the best funding for your small business. NerdWallet Small Business is a loan marketplace that lets you compare real financing offers from trusted lenders. It’s free to use and won’t impact your credit score.Types of business loan brokers
There are different types of loan brokers that may make sense for you based on your industry or your lending needs.
- Commercial real estate loan brokers can help you find the best rates on commercial real estate loans. They may even be able to help you find deals on commercial real estate.
- SBA loan brokers specialize in SBA loans and lenders, which can be especially difficult to navigate on your own.
- Franchise loan brokers can help you find franchises for sale, buyers and lenders who finance franchise purchases.
- Merchant cash advance brokers can assist you in finding merchant cash advance companies. They should help you navigate those agreements and identify red flags.
Business loan broker fees
Although brokers can save you time and help you access lower interest rates, they charge fees for their services.
Ideally, the lender pays the business loan broker. But in some cases, the borrower pays these fees as a percentage of the total loan amount. Percentages vary, depending on the type and size of the loan. An SBA loan, partially guaranteed by the U.S. government, typically carries a smaller fee than high-APR financing like a merchant cash advance.
Louis Caditz-Peck, executive director of the Responsible Business Lending Coalition, laid out this warning in an email to NerdWallet: “Brokers can often make more money by steering you into more expensive financing. … Today, a broker might be paid a hidden fee of 15% of your loan amount for placing you in a merchant cash advance that charges you an estimated APR of 100% or more, while an SBA loan that costs you 9% to 13.5% APR may pay the broker a smaller fee of 1% to 3%.”
If you’re responsible for paying the fee, ask your broker for two things in writing:
- The fee quoted as a dollar amount rather than a percentage.
- Confirmation of whether the fee is baked into the interest rate or billed separately at closing.
How to find a business loan broker
To find a loan broker for your small business, you have a few options:
Online research
An internet search is a fast and direct way to locate business loan brokers in your area. Professional association websites, such as the American Association of Commercial Finance Brokers and Small Business Finance Association Broker Council, are also useful resources.
Local small-business organizations
Local SBA offices, Small Business Development Centers (SBDCs) and similar business organizations offer a variety of free resources and advice. They can be good resources for finding business loan brokers.
Schedule an appointment with your local center to discuss your funding needs. Staff can help you decide if a broker is right for you and offer guidance for connecting with a reputable one.
Referrals
Ask fellow small-business owners in your area or in online communities if they’ve worked successfully with a business loan broker. A direct referral from another entrepreneur can help you feel more confident that the broker is reputable.
Reading reviews on websites like Trustpilot or the Better Business Bureau can also give you a sense of other business owners’ experiences working with an individual broker or brokerage firm.
How to choose the right business loan broker
A good business loan broker should have relevant experience, work with a wide network of lenders and be able to meet your unique financing needs. Be sure to research or ask about a broker’s credentials and training. No federal licensing requirement exists for business loan brokers, and only a handful of states require licensing or certain legal disclosures.
Here are some questions you can ask a broker to help determine if they’re the right fit for your business:
- How many lenders will see my application? A broker should have a sizable network and be able to submit your application to several lenders to help you get the best possible loan offer.
- What does your process look like? Before agreeing to work with a broker, you’ll want to understand exactly what’s included in their services and how they operate. If you want someone who will complete loan applications on your behalf, for example, make sure you express that upfront.
- How long does it normally take to get funded? Timelines may vary depending on the broker and their lender network. If you need financing quickly, you’ll want to make sure the broker has access to lenders who offer fast business loans.
- Do you make more money working with specific lenders? Caditz-Peck pointed out in his conversation with NerdWallet that brokers are running a business. Brokers rarely have a legal obligation to operate in your best interest, so it’s wise to have an understanding upfront about their commission model.
- How long will I have to decide once I receive a loan offer? A broker should give you time — typically a few days — to consider an offer before you need to give a decision. If someone is pushing you to make a fast decision, find another broker.
- How do you charge fees? A broker should be upfront and transparent about the way they charge fees and how much their services will cost. Avoid brokers that won’t provide this information or ask you to pay their fees before securing you a loan.
- Do you sell my information to third parties? A business loan application contains a variety of personal data. A broker should be transparent about what they do with that information. Make sure that your information is protected before agreeing to work with a broker.
Business loan broker red flags
Not all small-business loan brokers are reputable. As you research and compare different brokers, look out for anyone with these red flags:
- Guarantees loan approval. No broker can guarantee approval. A broker who does is likely running a scam.
- Isn’t concerned about your credit. Brokers often need to at least take a look at your credit score to best match you with appropriate lenders. There are options out there for business loans even if you have bad credit. But be wary of a broker who shows no interest in reviewing your credit or finances.
- Doesn’t give a straight answer about APR. “It's a big red flag if the broker won't tell you the estimated APR a financing product could charge, or if they try to downplay the APR as unimportant,” Caditz-Peck said in a follow-up email to NerdWallet. “Don't work with anyone who tells you to ignore the APR you would be charged, or dodges the question.”
- Has limited contact information available. You should be able to find multiple ways to contact a broker — a phone number, email address, physical address and a website. If it’s difficult to find information about the broker, go elsewhere.
- Doesn’t have reviews or references available. A broker should be able to provide reviews or contact information for business owners that they’ve previously funded. If you can’t find reviews online, or the broker can’t provide any of this information, that’s a big red flag.
- Asks for payment upfront. A reputable loan broker should never ask you to pay them before they do their job. Their success is based on your success. Be sure to discuss the broker’s fee structure in the vetting process. It’s possible that the lender will pay the broker’s fee, or you may be able to use your loan proceeds to pay the fee.
- Calls or emails you out of the blue. Caditz-Peck mentions this as another flag that should put a borrower on alert. If a broker contacts you first, especially by text or email, proceed cautiously.
Ready to talk to a business loan broker?
If you decide to work with a broker, use our script to help you prepare for your first conversation.
Frequently asked questions
Why should you hire a business loan broker?
A business loan broker can make it easier to find and secure the best loans and rates by using their professional network and expertise. They can also help you with the application process.
What is the difference between a business loan broker and business lender?
A business loan broker doesn’t actually lend any money. They use their network of lenders to find the best loan offer for you and your business. Your actual loan will come from a lender.
How do I choose a good business loan broker?
Research a broker’s certifications or training. Look for those who are upfront and transparent about their process, fees, timeline and network. Avoid brokers who ask for fees upfront, guarantee approvals, don’t have reviews or references or don’t provide several ways to get in touch.
