If you’ve borrowed money for your business before, you may have only ever done it directly through a bank or other direct lender.
It may never have occurred to you to look at using the services of a business loan broker. It’s only when it is recommended by a trusted business colleague or a friend because it helped their business might you consider using it.
The biggest question that arises when thinking about the differences between a direct loan provider and a broker, is which is best. In this article, we aim to answer that.
Direct Loan Providers Don’t Have a Middle Person
There is no one in the middle of the transaction who referred the customer to them or selected their loan product because it was the most appropriate.
In this situation, the loan provider may have done their own marketing to find businesses to lend to. This may work for them but for the business, the limited range of financing options presented might be disappointing. There may not be either the lending product range or a willingness to be flexible to find the right solution for a single business.
Nevertheless, some owners prefer going direct to the source. In which case, it’s hard to argue with approaching a direct loan provider to see what they can offer.
Business Loan Brokers Find the Best Deal
The best financing deal doesn’t specifically or necessarily mean the least expensive in the funding marketplace. That’s not to say that a good broker couldn’t do that for your business, but that’s not the only objective.
For newer businesses or ones with poor credit reports or other peccadilloes, finding a lender that is willing to lend the amount required at the rate desired isn’t easy. Therefore, different criteria are considered depending on what’s required.
Do Brokers or Lenders Specialize in Certain Industries?
Think about why you should use a business loan broker.
It’s a valid question.
One possible answer is that the lender has a wealth of experience dealing with loan applications for one or more industries. They understand the industry well and this makes it easier for the broker to recommend that lender specifically.
As a business owner, you may not even have been aware of the specialization of that particular lender. Just knowing that reduces the frustration level in trying to find a financing partner that understands your industry well enough to not be concerned over seasonal trading patterns that look unfriendly on paper.
Is a Broker Better than a Direct Lender?
Many times, the broker can get a better deal than your business can locate on its own. For one thing, a broker has access to all the latest loan types available. However, they may also be able to reach out to a lender that they have a good relationship with to make special arrangements too.
Going direct may be preferred by some business owners who like to know whom they’re dealing with. Yet for many business owners wanting to obtain preferential deal terms, get easier approval, or for other reasons of their own, a broker offers the chance to get a better outcome with their business borrowing.
It isn’t really a matter of which is best. That’s a choice for each business to decide based on their criteria and reasoning.