Business Loan Brokers: Do You Need One?
You need a business loan broker if you want hands-on help finding a lender and can pay 1% to 3% of the loan amount for their services. Skip one if you’re comfortable comparing lenders yourself, since a marketplace like LendingTree does that matching for free.
A broker shops your loan to lenders on your behalf, but not every broker puts your interests first. Some push pricier loans to earn a bigger commission, so vet any broker before signing on.
What is a business loan broker?
A business loan broker is an independent agent who connects business owners with lenders, including banks, credit unions and online and alternative lenders. The broker takes on the legwork of researching your options, and their lender relationships can put you in front of banks you might not find on your own.
None of that access is free. A broker earns a commission on the loan they get you, so their incentives don’t always line up with getting you the cheapest financing available.
Ready to compare lenders on your own instead? Check out LendingTree’s picks for the best small business loans.
Business loan brokers vs. loan marketplaces
A broker isn’t your only option for outsourcing the lender search. Loan marketplaces like LendingTree match you to lenders based on your funding needs, and applying directly to a lender cuts out the middleman entirely. Here’s how the three compare.
| Business loan broker | Loan marketplace | Direct to lender | |
|---|---|---|---|
| Best for | Hands-off borrowers who want expert guidance | Borrowers who want to compare multiple offers fast | Borrowers who already know their lender |
| Cost | 1% to 3% of the loan amount, sometimes plus an upfront fee | Free to use | No middleman fee |
| Time to fund | Fast — broker narrows the search for you | Fast — matches you to lenders in minutes | Slower — you research and apply on your own |
| How it works | Broker reviews your needs, then pitches you to lenders in their network | You submit one request, then get matched to lenders | You research and apply to each lender directly |
| Credit impact | Soft pull upfront, hard pull if you apply with a lender | Soft pull upfront, hard pull if you apply with a lender | Hard pull with each application |
Should you use a business loan broker?
A broker is worth the fee when your financing needs are complex or you’re unlikely to qualify with every lender. For straightforward borrowing, a broker’s expertise often adds less value.
Use a broker if:
- You need specialized financing, such as equipment financing, commercial real estate or an SBA loan.
- Your credit profile or business finances make qualifying more complicated. According to a LendingTree study, about 1 in 5 business financing applications get denied, and a broker’s lender relationships can improve your odds.
- You don’t have time to compare lenders, gather documents and negotiate offers.
Skip the broker if:
- You run an established business with solid finances and good credit.
- If your financing needs are straightforward and you need a standard term loan or a business line of credit.
- You have time to compare offers through a lending marketplace or by applying directly with lenders.
Pros and cons of hiring a business loan broker
Pros
- Speed: Faster lender research than doing it yourself.
- Access: Lenders and products you might not find alone.
- Convenience: One point of contact instead of juggling multiple applications.
Cons
- Fees: Can run steep on top of the loan itself.
- Conflict of interest: Broker’s commission grows with your loan amount.
- No guarantee: Approval is still up to the lender.
Cost of using a business loan broker
Most brokers charge a fee equal to 1% to 3% of your loan amount, on top of whatever the lender charges. Here’s what that looks like in dollars.
| Loan amount | 1% fee | 2% fee | 3% fee |
|---|---|---|---|
| $50,000 | $500 | $1,000 | $1,500 |
| $150,000 | $1,500 | $3,000 | $4,500 |
| $500,000 | $5,000 | $10,000 | $15,000 |
Fees vary by broker, loan size and term length, and a questionable broker could be motivated to guide you toward a more expensive loan since a bigger loan means a bigger fee. Some brokers also charge an upfront fee before they’ll start working with you. Get every broker’s full fee schedule in writing before you sign anything.
Red flags to watch for in a broker
Watch for these signs before hiring a business loan broker.
- Upfront fees: A broker who charges a fee regardless of whether you secure financing is a warning sign.
- Pushy sales tactics: A worthwhile broker gives you a range of financing options you can afford, not just the ones with the highest interest rates.
- Rushed decisions: You should get a few days to weigh your options. A broker pushing for a quick answer cares more about the sale than the fit.
- Bad or no reviews: Vet any broker’s track record before signing on.
- Poor communication: Expect responsive, consistent contact. Erratic or slow communication now is a preview of what’s ahead.
What questions should you ask a broker?
Before you sign anything, get answers to these five questions.
- How do you get paid? Some brokers charge you directly, some collect a commission from the lender and some do both. A lender-paid commission can push a broker toward whichever product pays the most. Get the fee in writing.
- Which lenders do you work with, and how many? A broker tied to three lenders can only show you three sets of terms. Get the names so you can check whether those lenders let you apply directly and skip the fee.
- How many hard credit pulls will this trigger? A broker who shops your file to a dozen lenders at once can stack up several hard inquiries in a short window. A good broker uses a soft pull to pre-qualify you and saves the hard pull for the lender you choose.
- What happens if the loan doesn’t close? Confirm whether any fee is refundable and whether you owe anything for work done before funding. Get the answer in writing.
- Can you share references in my industry? A broker who has placed loans for businesses like yours knows which lenders fit your revenue and time in business. Dodging the question is a reason to keep looking.
How to hire a business loan broker
Follow these steps once you’re ready to bring a broker on board.
- Clarify your funding needs. Know what you need financing for and how much you’re seeking before you start comparing brokers.
- Check your credit. Your personal credit can play as large a role as your business credit when you’re seeking a small business loan. You can check your credit score for free with LendingTree before applying.
- Compare brokers. Ask your professional network for referrals and research online reviews. Some states require brokers to be licensed or registered, so confirm a broker meets your state’s requirements before signing on.
- Ask your five questions. Use the list above to vet fees, lender network, credit pulls and references before you commit.
- Get clear on the process. Ask what level of assistance the broker offers and what to expect at each step, from application to funding.
- Read the fine print. Confirm every fee and your options for backing out before you sign anything.
If you decide a broker isn’t worth the fee, LendingTree’s guide on how to get a business loan walks you through gathering documents, comparing quotes and closing on your own.
Compare business loan offers