Finding the right broker for your unique needs is the start of the process. Here are some questions to ask and things to look out for to help you find the best broker.
1) What types of financing are they willing to offer?
Just because a commercial loan broker will provide you with financing doesn’t mean that it is a healthy solution for your business. This isn’t to say that there is inherently “good” financing or inherently “bad” financing. Rather, it is a question of how the financing matches up with the unique needs and opportunities of your business.
For example, if you are short on time then a hard money bridge loan might be the perfect solution… but if you have adequate time and a strong credit history, then that same hard money offer might be a horrible solution. If you are in need of operating capital maybe you should be looking at factoring your accounts receivable, or maybe it should be a sale-leaseback on some of your equipment… it all depends on your particular situation. This means that it is critical to locate a loan broker whose offerings match your unique situation.
2) How much are they willing to finance
A loan is only good if it ensures that your business has enough funding. If a broker or their lenders are only willing to finance a portion of the capital then it isn’t worth it. You should be able to get the funding you need to ensure that your projects or business is able to run smoothly.
When speaking with a broker make sure to look at what their loans offers looks like. This is where a portfolio of previous deals can be helpful as it shows if there is a history of offering financing amounts that mirror your needs.
3) Do they have competitive interest rates?
The cost of a loan is more than just the collateral or the down payment. What are the terms and rates like for their loan, and what do they do to ensure that you are receiving reasonable rates? Make sure you understand the total cost of the loan.
If the rates, terms, or amount of the loan feel off, then it isn’t a good fit. Each of these is an important part of the loan, and a broker who can’t balance them may not be right for you
4) Do they have upfront costs?
Does the broker have additional or upfront costs, and do you need to pay regardless of results? Or can you pay after all of the funds from the new loan have been deposited in your bank account?
If a broker requests upfront payment or requires payment in order to keep the process going they may not be the best selection. In most cases, you shouldn’t need to pay in order to get funding if there isn’t a guarantee that you will receive the funding you need. A responsible broker will only require you to pay if you like the financing they offer, get through underwriting, and receive final approval.
With a firm like ours you only pay for success. If you are declined or don’t like the terms – even if it is after three months of our team consistently working on your loan to get it through underwriting with a few lenders – we require no payment!
5) What types of relationships do they have with lenders?
Brokers should be in good standing with their lenders. If a broker only has a few lenders or is unwilling to try and connect with others on your behalf, then their capital access is going to be limited.
Find out if they have a favorite lending institution for your type of loan. Many brokers will have had good experiences with a lender and are more inclined to go to them. However, if they are unwilling to shop your loan out to other lenders it may be a warning sign that they are unwilling to find the best deal for your needs.
6) Do they require an exclusive relationship?
Some brokers have a lock-up clause in their agreement that restricts you from finding financing elsewhere. In those cases, you need to ensure that you are in love with the brokers’ offer before signing. If a broker has confidence in their skills, they will be happy to demonstrate them to you without the need of ensuring exclusivity.
We don’t have any restrictions like this placed on clients. You are welcome to speak with other lenders and brokers while working with us. We are confident that we will find the best terms available and welcome the opportunity to prove it.
7) What are their relationships like with their clients?
Do your research before signing with a broker. There are a lot of us out there, so be sure to pick one who has a good relationship with their clients.
Additionally, you should check and see how open they are with even the most basic of information. Do they have an address, phone number, an email to reach them at directly? Are they willing to provide references or previous experience? Are they willing to share info about where they are shopping your loan package? If they aren’t willing to share this information then they might not be the right fit. A difficult broker to work with will have a history of negative interactions with clients. If they were difficult to work with before then they will be difficult to work with now.
We know finding a broker is challenging. Knowing what to ask and where to look can be confusing. That’s why we work with you to find the best options for your commercial capital needs. If you would like more information about how our team approaches commercial lending, please contact us.