A good commercial finance broker can save you a lot of time. They know which lenders are likely to consider your business, how to present an application and which products suit different needs. Like any professional relationship, it works best when you understand how they operate from the start. These questions are worth asking early, and a reputable broker will be happy to answer them.
How are you paid?
Brokers are usually paid by commission from the lender, a fee from you, or both. None of these is wrong in itself, but you should know which applies and roughly how much is involved. Ask whether any fee is payable upfront, only on completion, or regardless of whether a loan goes ahead. For many types of credit, brokers are required to disclose commission arrangements, so you are entitled to ask.
Which lenders do you work with?
Some brokers search the whole of the market, while others work with a selected panel. A panel is fine as long as it is broad enough for your needs, but it helps to know whether the broker can access high street banks, specialist lenders, asset finance houses and invoice finance providers, or only some of them.
- Do you have experience with businesses in my sector?
- Have you arranged finance of this size and type before?
- Can you access government-backed schemes where they are relevant?
Are you authorised by the FCA?
Not all business lending is regulated, so not every commercial broker needs to be authorised for every product. Many are, though, and some products, such as certain lending to smaller partnerships and sole traders, do require it. You can check any firm on the Financial Conduct Authority register. Ask the broker to explain which of their activities are regulated and which aren’t, so you know where you stand and what protections apply to each part of the service.
What happens to my information?
- Will you run a credit search, and is it a soft or hard search?
- Will my details be sent to several lenders, and will you tell me which ones before you do?
- How will you store and share my documents?
Multiple hard searches in a short period can affect how lenders view an application, so it is reasonable to ask for a clear plan before your details go anywhere.
What the process should look like
A broker should be able to tell you which documents they need, what the lender is likely to ask and a realistic timescale. They should also be clear about what they don’t do. Brokers can explain options and present your application, but the lender makes the credit decision and sets the terms.
Once offers arrive, ask the broker to set them out side by side, including the total amount repayable, fees, early repayment charges, security and any personal guarantee. A clear comparison is one of the most useful things a broker can provide. Take your time, ask follow-up questions and take independent legal advice on any guarantee before you sign.
This article is general information, not financial advice. Loanleaf is an introduction service, not a lender or broker, and is not authorised by the FCA.
