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Published 07 June 2022
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Do I Need a Business Finance Broker?

A business finance broker can provide support and assistance while looking to secure the best finance option for your organisation. However, you should make sure you know the difference between applying directly with a lender, and going through a broker, ahead of time.

If you haven’t done it before, applying for business finance may seem a little intimidating. And if you run a small business, you might not have the capacity to dedicate time to ensuring you are making the right choices when it comes to securing funding.

This is where a business finance broker can potentially step in. Read on to find out what a business finance broker is, how they differ from applying directly through a lender, and what to consider when looking for one.

» MORE: Why do businesses need finance?

What is a business finance broker?

A business finance broker – also known as a commercial finance broker or a business loan broker – essentially acts as a go-between, with your business on one side, and the lender on the other.

They can take care of the entire process, from sourcing the right type of business finance based on your specific needs to liaising with the lender, and ensuring your application runs as smoothly as possible.

As for the business finance options they compare, that will be down to the individual broker, and what you are looking to do for your business. It may include:

» MORE: 17 different sources of business finance to help you reach your goals

How are business finance brokers paid?

Typically, a business finance broker is paid in one of two ways:

  • Upfront fees:Some brokers will charge an upfront fee for using their services
  • Commission:Some brokers may be paid a commission by a lender for referring their services

In some cases, a business finance broker may both charge a fee and receive a commission.

It is important to make sure you understand how your chosen broker is being paid before using their services, and how that will affect the overall cost of your borrowing.

Direct lenders vs business finance brokers

Before deciding whether or not you need a business finance broker, it is good to know how the process differs from applying directly to the lender.

Applying directly to the business finance lenderApplying through a business finance broker
  • You will be in control of the application process.
  • You will likely be applying for a specific form of business finance.
  • You may be able to access funds quicker by cutting out the middleman.
  • You won’t pay any broker fees.
  • The broker will take care of the application process for you.
  • You will get an overview of the various business finance options available to your organisation.
  • You may receive additional support and advice on the best option for your business.
  • You may pay the broker a fee for using their services.

What to consider when looking for a business finance broker

As with applying for business finance itself, you shouldn’t rush into a relationship with a business finance broker. Before securing their services, you should consider:

  • whether they are regulated by the Financial Conduct Authority (FCA)
  • whether they are a member of the National Association of Commercial Finance Brokers (NACFB)
  • how much extra will using a broker add to the cost of your borrowing, including any fees and the broker’s commission structure
  • whether they have real, traceable customer case studies to show how they have benefited past clients
  • whether they specialise in business finance over other forms of lending
  • the range of business finance options they consider
  • how their relationship with the lenders they recommend works, and whether they are incentivised to offer one lender over another
  • whether they have professional indemnity insurance if their advice has a negative effect on your business

Image source: Getty Images

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