A business is always in need of money, but providing an instant injection of cash is not a cinch. A business does not always produce the desired profits. Other factors such as expansion, inventory management, and working capital also make it challenging for an entrepreneur to have sufficient funds to meet day-to-day operation overheads. At a certain point in time, no matter how efficiently you have been running your business, you would need to borrow money. Securing funds for a business could be quite challenging.
Not only do you need a business credit score, but you also need projected profits, especially if you need money for a specific future project or your business is a start-up. Most lenders are slightly strict about approbating business loan applications. The approval criteria for a business loan are not the same as the approval criteria for a personal loan.
Securing funds for a business is a bit difficult, but business loan brokers could make it happen. A business loan broker is a financial professional who would help you borrow money from a direct lender. They actually work as a mediator between you and lenders. They will understand your requirements and then suggest a suitable option for you. As brokers have a large network of lenders, they would find the most suitable lender according to your requirements.
By having a business loan broker, you would be able to easily process your loan application. The broker would be responsible for completing all the paperwork rather than you. The whole process becomes smoother and faster when you take out a business loan from a broker.
How business loan broker helps SMEs
Here is how a business loan broker help helps SMEs:
- Access to have a wide network of lenders
One of the biggest benefits of contacting a business loan broker is that they have a large pool of lenders. Every lender has their own approval criteria. For instance, some lenders might accept your application with a bad credit rating, while others would accept your application with a good credit rating. Brokers have this information in advance, and therefore, they would find a lender for you whose criteria you successfully meet.
Of course, in case of a bad credit rating, they would directly contact a bad credit business loan lender. If your credit score is too bad, they will help you contact a lender who provides quick business loans with no credit checks in the UK.
Brokers do not network only with online lenders; they also network with banks, credit unions, and government-backed loan programmes. Brokers provide lenders whose interest rates, terms and fees are suitable to your financial condition.
- Personalised loan options
Another benefit of choosing a loan broker is that you would be able to qualify for personalised loan options. Brokers generally assess your financial application. Not only do they look at your profits and losses, but they also look at your credit score. Brokers run soft credit checks, so you will not lose any credit points. In addition, they would like to know your industry, existing debt and cash flow.
It is worth checking whether your business will be able to repay the debt or not. Brokers decide to choose a lender for you that provides you with a loan that suits your business best. The repayment terms, interest rates, fees, and other charges will be customised to your needs. It is worth noting that lenders would run hard credit checks before approving a loan. Brokers can just arrange a suitable lender for you. The rest of the thing is to be done by lenders.
- Less wastage of time
If you directly apply to a lender for a business loan, you would have to fulfil all formalities on your own. You will have to do research to ensure that you are choosing the right lender. It is hard to determine in advance whether your lender would accept or reject your application. They will run credit checks to decide whether or not to sign off on your application. If they are not certain about your repaying capacity, they will most likely turn you down. You will lose your credit points due to hard checks, and you will face difficulty getting approval for a loan.
However, applying for a business loan with the help of a broker is quite easy. They will carefully look through your application. They will run soft credit checks and check your business profitability before consulting lenders. Based on your overall financial condition, they will choose direct lenders for you. As they complete the paperwork, the application process will be sped up. When you apply for a business loan with the help of a broker, you will find it less waste of time and money.
Is it worth consulting a broker?
Some people may find that it is worth it to go directly to a direct lender or bank because this will help save money on brokerage fees. Well, it is a good option if you are looking to save money on broker’s fees and commission, but you will have limited options. There is no guarantee that the lender you are applying to will actually entertain your application.
It is likely that they will reject you. But with the help of a broker, you will have a wide variety of lenders to pick from. You would easily choose a lender that provides loan deals based on your suitability. Brokers would help you choose a flexible repayment term and better interest rates.
As far as it is about broker’s fees, they charge in two ways:
- Commission from a lender – once the application is approved, your lender will be responsible for paying the commission. However, this is passed on to the borrower.
- Flat fees – some brokers charge flat fees, which is a percentage of the loan amount. This is a one-off cost. You do not have to pay every now and then.
What to look for while choosing a business loan broker?
Qualities that a business loan broker must have include:
- Years of experience under the belt. They must have a track record of providing business loans to entrepreneurs.
- They should be transparent about fees and commissions. They should clearly explain it in advance.
- They should have a strong network of direct lenders.
The bottom line
Business loan brokers could help you choose the best direct lender whose loan deals match your needs. It is hard to find a suitable online lender on your own, but brokers could find the most ideal and suitable lender for your business that matches your needs and expectations.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.
