Broker vs. Direct Lender

Everyone dreams of owning their own business, but operating a small-scale business without working capital can create serious issues. Borrowing is an essential tool used by thousands of small businesses to survive and thrive. According to SBA over 80% of small business borrow capital one or another for their business.

When it comes to securing a working capital loan, there are two options available: go through a broker or go directly to the funding source. Local bank or national broker!

When it comes to finding the right financing solution, small business owners face a variety of problems: how to analyze business needs, conduct due diligence h, locate a lender, negotiating a deal, a limited comprehension of financing terms, and the list goes on. For someone facing some of these challenges, it is almost always a better option to go with a broker. Broker? I don’t want to work with a broker. It will cost me more or my rate will go up? Well, that’s not always true. Mortgage Broker, Insurance Broker, Stock Brokers, and Business Brokers all exist for a reason which is not to cost you more but create fundamental solution to your funding needs. Most direct lenders do have insides sales who also marks up whatever it is you’re buying and they’re not broker but could cost you more.

Brokers are experts in lender-borrower matchmaking. A broker can take the load off your back. In fact, your broker does most of the legwork. Plus, many agents today offer free consultations and waive application fees.

Surprisingly, there are loan-seekers who under any circumstance would not work with a broker. They believe that it is always better to go directly to the funding source. However, this couldn’t be any further from the truth.

Loan brokers are just like real estate, travel, stockbrokers and insurance agents. Their special relationships and networks allow them to often times locate and/or negotiate the best terms for their clients. It may come as a shock to some that they use the services of a broker more often than they think. Chances are they have booked a flight, hotel room, or rental car from websites such as www.Orbitz.com, www.Travelocity.com, and www.Expedia.com.  These sites even offer discounted bundled packages. One can even shop for business financing the same way through online lending marketplaces such as LendingTree.com and www.Quote2Fund.com. Why? To save money and time of course!

Besides the energy, money, and time saving, there are several other benefits to working with a loan broker:

  • Brokers have access to a large network of lenders. Once you contact them, they send your application to various lenders. The purpose of sending the application to the different lenders is to get the best possible rates from the lender. In the case, you directly contact any lender there may be possibilities to get better rates from some other lender.
  • Some lenders only work with brokers. To avoid managing sales team, increase cost of acquisitions, some funding sources will not work direct with consumers but go through Brokers only for their business because of expertise, quality and cost savings brokers can bring. Since 1982, Pawnee Leasing has worked with brokers and dealers only for all their transactions.
  • Brokers can come to the rescue when you’ve been declined. Sometimes a business needs emergency cash but what if the bank rejects your application? What do you do? Start the arduous process over just to get declined again? Brokers can easily access their diverse network of lenders and products to provide a variety of options within hours.
  • Brokers help small business owners focus on business. The business owner normally runs the small business on his/her own. To avoid neglecting important business activities,  it’s better to hire a loan broker and let him/her do the work.
  • Brokers are experienced professionals. Many broker agents have years of experience in the lending and banking industries, making them experts in finding the best options and rates for any given business. They have expertise in areas such as:
  • Debt-service Coverage
  • Product knowledge
  • Underwriting/Credit
  • Industry awareness
  • Bank Awareness

We’ve seen customer stray away thinking they can find better but they ultimately come back realizing that we all work w/ the same lender they went shopping. Some lender’s rates are publish whether you go with a broker or direct. Working with direct national lender isn’t always effective especially if you’re a marginal customer. What would you do if get turned down? Go to the next and so on meanwhile time has spent looking high and low when you could have already funded if you worked with the right brokers.

It’s not the broker it’s how bad that broker it. Find the right one who will look out for your business.

The bottom line: brokers can save you energy, time and sometimes money by locating the best option on the market for your business–an extremely difficult task for a novice borrower.