If you’re in business, odds are you have dealt with small business loan brokers before. These are individuals or companies that specialize in securing funding for business owners.
Generally, a company can secure quick funding by applying online with companies like Kabbage, or OnDeck Capital. Companies like these can eliminate the need to work with a broker. However, what if the online lenders say no?
Questions to ask Small Business Loan Brokers
Not all brokers are created equal, it is important to make sure you choose one that has your best intentions in mind. Here is a list of questions for you to ask your loan broker.
Explore the most reputable loan marketplaces:
| Lender | Minimum Revenue | Time in Business | Minimum Credit | Next Steps |
|---|---|---|---|---|
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$100K/year | 1 year | 600+ | See if you qualify |
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$10,000/mo | 3 mo. | n/a | See if you qualify |
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$10,000/mo | 3 mo. | n/a | See if you qualify |
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$75,000/yr | 24 mo. | 620+ | Request Intro |
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Varies | Varies | 560+ | See if you qualify |
Do you charge any up-front fees?
In most cases, A business owner should not be charged any sort of fee before receiving funding. Some brokers may ask for payment before they will give you any offers. In most cases, do not pay the fee, as brokers are paid a percentage based on total funding they provide. This means the broker should compete for your business, not the other way around.
The only time lenders require up-front payment is when there is some type of asset that is being used as collateral for the loan (i.e. if you are using real estate or equipment as collateral, there may be some sort of appraisal fee). In this case the lender will hire a third party company to come appraise your items, and give them an estimate of what it is worth. This fee is to insure the lender is not out the fee if the deal does not come together. However, brokers should not be charging you.
Are you a direct lender or small business loan broker?
This is a great question to ask to better understand what this individual will be doing to secure you this funding. If they are a direct lender, this means that they work for and represent one company. They will be giving you an offer based on the internal underwriting guidelines of the lender. If they claim to be a direct lender, ask them for a copy of the companies underwriting guidelines to see if you qualify. It would not make sense for somebody with a 550 FICO score to apply with a company that has a minimum 650 score required for funding. This practice can help you to reduce the amount of inquiries on your credit report.
Do you deal with any other small business loan brokers?
Often times, a broker will co-broker a deal, meaning they bring in another small business loan broker to help. This can result in your information being passed around to many hands, which increases the risk of you being added to call and email lists – super intrusive! Be sure you are dealing with one broker, not multiple.
Avoid going through a broker when you can go direct:
| Lender | Minimum Revenue | Time in Business | Minimum Credit | Next Steps |
|---|---|---|---|---|
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$10,000/mo | 1 year | n/a | See if you qualify |
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$15,000/mo | 6 months | n/a | See if you qualify |
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$100,000/yr | 1 year | 500+ | See if you qualify |
Can you introduce me to 3 references?
This is always helpful. You always want to speak to other happy, satisfied customers. Securing working capital for your business is a very important aspect of your overall cash flow, if not the most important. Do not just hand over your bank statements to someone you haven’t properly vetted.
Summary
Choose a broker that
- Will not charge you unnecessary fees
- Refers to him or herself as a broker of sorts, and not a lender
- Works exclusively on your deal, and can introduce you to other happy customers
- Can introduce you to references
- Has a public profile (Linkedin, nice Website, office address, etc.)
