Small Business Loan Lenders is confusing, and you may need a little help if you are trying to fuel your business growth. Looking for a small business loan? There are several different ways to find financing to grow your business. You can borrow from a traditional bank, go to a small business loan broker, or try out a direct lender.
It is also possible to go to a business loan marketplace where lenders and businesses meet. If you are looking for a loan, you can sign up on a marketplace and see offers from different lenders. You are not going through a third party, but you still may be able to find loans that fit your needs.
Different Types of Business Loan Brokers
Small business loan brokers help business owners find business cash flow loans, expansion loans, equipment loans, and other funding types. Brokers receive a commission as a percentage of the loan amount, and the lending company pays the commission.
Brokers are aware of and know different lending options, and brokers may have relationships with different lending partners. By using a small business loan broker, you may be able to find a loan with acceptable terms.
Be aware that small business loan brokers are all different. Some brokers focus on a particular industry, and some only specialize in short-term loans.
Examples of business loan brokers include:
Startup Loan Broker
If you are running a startup, finding funds can be difficult if you do not have a long and solid credit history. A startup broker is there to help you find short and long-term loans fit for your situation. You may need to use collateral.
SBA Loan Brokers
The Small Business Administration backs up certain loans you get through banks or credit unions. SBA loans come with specific requirements, however, and some businesses find it challenging to quality.
SBA brokers know the qualifications you need to be approved for various types of small business loans. An SBA broker will walk you through the application process and provide advice.
Merchant Cash Advance Broker
If you do not have good credit but need financing fast, a cash advance loan could be an option. A Merchant Cash Advance Broker will bring in alternative lenders to look at your revenues and cash flow – not just your credit. A merchant cash advance broker can help you find capital dependent on the funds in your credit card merchant account. Cash Advances may be a great way to gain cash for your business, but beware – they are expensive loans.
Commercial Loan Brokers
Commercial loan brokers know financing options and have established relationships with many traditional financial institutions and online lenders. A general loan broker or commerce loan broker should be able to provide you with many different options.
Equipment Financing Broker
Looking to purchase or lease equipment? An equipment leasing broker has expertise in equipment financing and will guide you through that financing option.
There are equipment loans that may have short loan terms and require you to use your equipment as collateral if you have poor credit. You may also need to provide a down payment. Your equipment financing broker has the option of finding you a sale-and lease back loan.
Advantages of Using a Small Business Loan Broker
- Expert guidance to assist you in understanding your funding options and finding lenders.
- Save you time. If you do not have days to spend looking or financing deals, a broker has relationships that can help you identify the best option.
- Brokers know what loans to look for to match your needs. Brokers research your business and personal credit scores and let you know the likelihood of being approved.
- You do not pay for a broker’s services which means you have nothing to lose.
Most business consultants will sign you in with a consultant agreement that comes with clauses such as finder’s fee, consultant fee, application fee, broker fee, and success fees mean to us that you’re working with a consultant not a business loan broker.
Paying consultant upfront disincentivizes and could result in sub-par funding since they’re no longer vested in getting you the right funding.
Unlike consultants, small business loan brokers will not receive a dime until the client obtained their funding first — lender pays the broker commission not the client.
Most consultant will double dip, receive money from client and from the lender, however, to us this is unethical and mostly frowned upon by lenders but since direct lenders don’t question such practices, you end up paying too much to borrow. That’s why it’s critical to work with an ethical company. Liberty Capital never charge any fees successful or not.
Direct lenders work with you to get the business loan you need without using a go-between. You can consult with a direct lender online plus complete an application from the comfort of your office. Direct lenders are entities offering funding to you out of their resources.
It used to be that the most direct business slender were banks and credit unions. Now, however, some companies are set up to deploy capital to businesses. Non-bank lenders manage their own money, pool the money of investors, or use a crowdsourcing approach.
Suppose you have a good track record for growth and profitability and good personal and business credit? You may find overall interest rates and fees are lower through a direct lender. At times, a direct business lender can loan you a higher amount of money.
A list of direct lenders includes:
- Kabbage – best overall
- Fundbox – revolving line of credit
- Kiva – offers microloans
- Fundera – offers SBA loans
- OnDeck – same day funding
- Lendio – good comparison site
To not let their catchy names confuse you, each direct small business loan company has advantages that you will not find anywhere else, and you can access direct funding companies online.
Advantage of Using a Direct Lender
- Direct business lending allows you to give your lender your full story, not just the financial reports. A direct lender tends to give you higher approval odds since the lender knows you.
- Applications with a direct lender are often easier than any other type of application. They help by streamlining the loan application process. Often you complete the application online.
- Decisions are much quicker. Direct lenders do not go back and forth with brokers. They get a quick decision on loan applications so you can get back to work.
- If approved, your funds can be available in 24 hours. Your direct lender makes it easy to approve loans and send the money directly to you without waiting for a third-party approval.
Small businesses are the drivers of the economy, and loans are an integral component of their businesses. Small business loans can help owners and entrepreneurs access an infusion of cash or a credit line to help them remain open and grow their business.
A marketplace for small business loans doesn’t make it a direct lender but directs you to apply yourself which is neither a lender or a broker but just a website providing info on such funding sources. Most funding sources in the online business loan marketplace also works with traditional brokers so you’re not missing out and some brokers work with traditional lenders who aren’t a member of any online loan marketplace. LendingTree for example goes with who can pay the most not the best loans in the world but who pays the highest and willing to compete with others whereby many participants buy the same leads.
Most loans today are offered by online lenders and not by brick and mortar banks and credit unions. Online lenders generally large sources of funding and offer small businesses a more convenient application and funding process. Before making a borrowing decision, research the different direct lenders and brokers to find your best option.