Should I Use a Broker to Apply for a Business Loan or Do It Myself?

There are two main ways to apply for a business loan. Either you can apply directly to the lender, or you can use a commercial finance broker to help with the process. Applying directly means that you can personally vet which lenders you’re applying to, and retain complete control of the application process, however, there are many benefits to using a broker.

“What are the main benefits of using a broker to apply for a business loan?”

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1) They know the market

Typically, brokers will have an in-depth knowledge of the commercial finance market. This means they’ll have the inside track of the lenders who operate in it. Chances are, they’ll know straight away which lenders will be suitable for:

  • Your industry
  • Your business type
  • The nature of your loan

Importantly, they’ll know which lenders have criteria which is more favourable to your specific circumstances.

2) They can save you time

Whilst lenders may have some information on their products and criteria on their website, researching each lender in detail will take up precious valuable time as a business owner.

You can think of a broker as a sort of matchmaking service for commercial finance, they help connect you with the lenders which best suit your needs. They can also help you to understand the most suitable finance products available to your business.

Brokers have close relationships with lenders because they work with them daily, so they can follow through with the application to completion on your behalf and ensure things run smoothly. If you’re going direct, you may not get the same personal service. Often contact with lenders is via their contact centre facility which can be frustrating and time-consuming.

3) They can support you with the application process

As we explored in our last blog, creating a successful business loan application is a detailed process. You’ll need to create a business plan and provide various pieces of information such as business tax returns, profit and loss statements and bank statements.

Because brokers are dealing with loan applications every day, they’ll know the process inside and out. You’ll gain the benefit of their knowledge in writing your application, and expertise on how you can present the information in the most favourable way.

4) They offer wider access to lenders

In the UK there are hundreds of commercial lenders. However, around 50% of these only accept applications from a broker. You’re essentially cutting out half of the available market by applying directly. That’s a lot of lenders you could be missing out on.

5) They can help safeguard your credit rating

By ensuring you only apply to the most suitable lenders, a broker could help you to safeguard your credit rating.

This is because each application typically requires a hard credit check, where the lender makes a complete search of your credit report. Unlike a soft credit check which does not affect your credit score, a hard credit check leaves a permanent record on your credit report.

A couple of hard checks might have little effect on your credit score, but if you were to make multiple applications for loans, finance or other credit, it could damage your credit rating. In the UK hard credit checks usually stay on your credit report for twelve months.

“Won’t it cost me money to use a broker?”

Not necessarily. Whilst it’s true that some brokers charge a fee (usually under the guise of an admin fee) there are many brokers who don’t charge a penny. Brokers will usually declare upfront if there are any arrangement fees for using their services. A good example is Origin Finance, which won’t charge a customer anything for their services as they’re renumerated in full by the lender.

“How do I find a good commercial finance broker?”

There are many brokers in the UK and it can be daunting if you don’t know which one to use.

Consider factors such as whether they have the whole of market access (rather than just a select panel of lenders), and if they have prior experience arranging finance in your specific industry. Check out their customer service process; aspects such as dedicated Account Managers are a good sign. Reviews sites such as Trustpilot and Google reviews will also tell you a lot about the kind of service the broker provides.

Once you’ve found a good broker it will pay dividends for your business in the long term, because you’ll have a trusted partner for all your future business financing needs. Disclaimer: The views expressed in this blog article are those of Origin Finance and do not constitute financial advice.

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