Many business owners in need of funding are faced with the decision whether to approach a bank (or other direct lender) on their own or work with a commercial broker to arrange financing.
You should be able to consider a good broker your partner throughout your financing project.
Working with a commercial broker can offer you, the business owner, many benefits resulting in saved time, effort and frustration.
Here are a few of the benefits a broker can offer.
1.
Multiple products and services.
Many commercial brokers, those who focus on business clients only, offer many financial products and services to assist with your needs.
Unlike a mortgage lender who may have multiple mortgage products but only offers mortgages, brokers often deal with multiple products including but not limited to mortgages, business acquisition loans, equipment leasing and working capital solutions and more.
This may not sound like an advantage to you, especially if you know you only need a mortgage, but trust me it is, even if you only need a mortgage.
Why? Because ABC Mortgage lender can only speak to you about the 5 mortgage products they sell.
Is that necessarily a bad thing, no, it's not bad, but it is limiting.
Read on to learn more.
2.
Network of lenders.
An experienced broker will have access to a network of lenders within your financial product to consider for your transaction.
ABC Mortgage may even be one of the lenders within their network.
Now, in addition to ABC's 5 products, your broker can also review the 7 mortgage products from World of Mortgages as well as the 3 offerings from Mortgages R Us.
Your options for mortgages just went from 5 to 15, simply by using a broker.
Also, the broker doesn't need to hard sell you on ABC Mortgage products, because you now have options.
Brokers are there to work on your behalf to find the best solution for your needs.
Most people don't realize that brokers are evaluated by the lenders they submit transactions to and if the lender determines a broker doesn't submit quality transactions that can ultimately close and fund, they are prohibited from submitting future transactions.
This will drive reputable brokers to take the time to understand you and your business needs upfront and then determine which lender should review your transaction, based on your specific situation.
As with any business, your needs may change over time and your broker partner is there to help you now and in the future.
3.
Develop a now & later relationship.
As I mentioned at the start of this article, you should be able to consider your broker a partner.
Perhaps right now, you only need a mortgage but in the sometime future, you may need equipment and furnishings for your location.
Equipment leasing - your broker has this covered.
Customer placed a large order (good news) but you don't have enough inventory to fulfill the order (bad news)? Purchase order financing - your broker has a solution for you.
Customers taking full advantage of your generous payment terms and now your cash flow is impacted? No problem, your broker can initiate a factoring arrangement for you.
Business is wonderful and you want to open a second location? Yep, your broker can probably arrange a business expansion loan for you too.
Of course, not all brokers deal in every type of transaction mentioned here, but by establishing a broker relationship, you don't need to find lenders in 4 additional industries to keep your business running successfully.
Your broker will have access to experts in each of these very different financial sectors and will work to match your needs to the proper expert solution.
4.
Impact on Your Credit Score.
Another thing to consider, if you do have multiple needs within a short time frame, your credit history will have only have 1 inquiry from your broker, versus multiple inquiries from the various lending institutions you visited in trying to close your transactions.
Many people are surprised to learn how their FICO scores are negatively impacted due to multiple inquiries within a short timeframe, even if no credit was extended.
As with any relationship, you may need to work to find the best partner for you, broker or otherwise.
Now you have some additional information to assist you in making an informed decision when selecting your commercial funding partner.