What You Should Know Before Becoming a Business Loan Broker

Are you passionate about helping small businesses grow? If you are, you’d be glad to know that you don’t necessarily need a degree in finance to help entrepreneurs achieve their goals. By becoming a business loan broker, you can help business owners have access to funding when money is tight or when it’s time for them to expand their business.

This article will shed light on why jumpstarting a career as a business loan broker is a fulfilling profession.

What does a business loan broker do?

Every business needs capital to stay afloat. Whether it’s for paying employee salaries, consolidating debts, relocating to a better location, or keeping their office lights on, entrepreneurs will need enough funding.

That’s where you come in–when it gets difficult for small business owners to get funds from traditional lenders like banks or credit unions, you as the business loan broker could act as their partner in finding the right financing solutions.

Also known as commercial loan brokers, a business loan broker aims to help small business owners have access to funds by identifying the right type of loan and the best lender to help them increase their capital.

How does a business loan broker earn?

Small business loan brokers earn by helping entrepreneurs get funding, which ranges from business loans, equipment loans, lines of credit, and other types of alternative financing. In exchange for their services, they normally charge a certain commission from lenders. This commission directly comes from the additional service fees charged by the lender to the clients.

What clients pay for is the experience and expertise of business loan brokers in the world of financing. They can tell entrepreneurs the best type of loan for their needs and the suitable lenders to partner with. This is why business loan brokers have a vast network of connections–they have friends in banks and local financing organizations.

Why would small business owners work with loan brokers?

Not all small business owners are aware of the advantages of working with a loan broker. But for those who are looking to get better terms, stronger lender relationships, and more preferable rates, then partnering with a loan broker will go a long way.

Business loan brokers are obsessed with finding the best financing solution for entrepreneurs who are strapped for cash. They use their network to help lead them to the right lender who will guarantee their success. This is why, all the additional charges incurred to the client are worth it: they not only gain access to funds; they also open themselves to a pool of experts that would normally take hours, days, or weeks to search for when they do it on their own.

Most common specializations of business loan brokers

If you’ve finally decided to become a business loan broker and you don’t know where to start, you can check the most in-demand types of loan brokers below.

1.   Equipment loan brokers

Equipment loan brokers help clients get the capital to purchase, repair, upgrade, or replace equipment, which is essential to their operations. They are the go-to experts, not necessarily for finding the best office equipment or construction machinery, but for helping clients prepare the requirements when applying for an equipment loan.

If you decide to become an equipment loan broker, you must know the different requirements and qualifications for getting an equipment loan in every industry. You also need to know which equipment can be used as collateral, and what terms will help the client save more.

Equipment loan brokers must be knowledgeable about the trends in the client’s industry, which equipment depreciates fast, and when is the best time to apply for an equipment loan. They must also know which lender offers a good rate, and which lenders are experts in your industry.

2.   SBA loan brokers

The Small Business Administration (SBA) offers a wide array of business loans for startups and entrepreneurs. For first-timers, it can get frustrating as to what type of loan is best for you–are you more qualified to get a disaster loan than an SBA 7(a)? Is it time for you to get a microloan?

SBA loan brokers can answer all your questions about your intent to apply for SBA loans because they are experts in the field. In case you’re not aware, SBA lending caters solely to small business owners who were not able to secure funding from banks or credit unions. The accredited SBA lenders provide financing to small businesses, while the government guarantees up to 85% of the loan in the case it defaults.

The loan requirements, rates, terms, and qualifications vary from one SBA loan type to another. These requirements vary from one lender to another too, as well as the location and industry of the business. In which case, working with an SBA loan broker will come in handy to answer these questions.

3.   Invoice factoring loan brokers

When getting a small business loan is not an option, some small business and startup owners opt for invoice financing. Invoice financing allows clients to sell their invoices to a third-party company (often a factoring company) instead of waiting for these invoices to be paid between 30 and 90 days.

Lenders will provide up to 95% of the client’s total invoice value, which clients can use to accelerate their cash flow. Once the customers pay all invoices, the client will repay their lender with a small transaction fee.

The job of the invoice factoring loan broker is to help clients find these factoring companies who will be interested in purchasing their invoices. In most instances, you, as the factoring broker, will sell your clients’ accounts receivables to potential buyers or to a group of buyers.

In Conclusion

Being a business loan broker has tremendous benefits especially if you are obsessed with finding the best financing solution for your clients. As previously stated, you don’t need a degree in finance to become a loan broker. You simply need to have sales and marketing experience so you can help your clients get the best from your services.