Commercial Loan Brokers

In this article, we are going to discuss working with commercial loan brokers as it pertains to receiving the business funding that you need for your company. As we touched upon in our previous article relating to general business loan acquisitions, the usage of a commercial loan broker may be extremely beneficial to you as a relates to acquiring business credit facilities for your company. This article, will focus not only on the benefits of using a commercial loan broker but also the downsides as it pertains to working with these individuals and firms that are actively engaged in the business of placing your company with the capital that you are seeking. This article will also focus on the issues that pertain to what you'll need to provide to a commercial loan broker as you work with them in order to secure the funding that you are seeking as a relates to asset purchases, a business purchases, accounts receivable financing, and general working capital. First, we are to discuss the benefits of working with a commercial loan broker as you seek to obtain financing for your business.

 

Primarily benefit to working with a commercial loan broker is that they will be able to introduce you to hundreds of different lenders that operate within a number of different spectrums as it pertains to receiving business financing. It should be noted that specific lenders from time to time have interests in very specific industries and are willing to make loans to pay for the business that operate within it specifically specific industry genre. Not all banks operate the same when it comes to business clients. As such a commercial loan broker will be able to effectively allow you to find the specific financial institution that is most likely to provide you with the capital that you need to develop or expand your ongoing business activities. This is especially true as it relates to today's economic environment as many banks have turned away from making loans and providing credit facilities to smaller and medium-sized businesses. As such, working with a commercial loan broker provides you with the ability to effectively showcase your business plan to a number of specific entities that have a desire in providing financing for the business industry that you operate within. Additionally, commercial loan brokers are very well versed as it pertains to obtaining business financing. As such, they will be in a position to effectively guide you through the commercial lending process as it pertains to receiving business loans and business lines of credit for your company. Additionally, many commercial loan brokers who work actively on your behalf in order to effectively secure the best deal possible as it relates to the business credit facility that you're seeking. Again, it is imperative that you are able to acquire the appropriate advisors as it relates to working with a commercial loan broker so that you can receive appropriate advice so that the individual from that you're working with this not seeks only to work on your behalf with the anticipation of receiving a commission. We strongly recommend that any time that you engage a commercial loan broker for their services then you also have your certified public accountant and attorney on hand to review and documentation that they provide you with as it pertains to the services of this specific loan brokerage firm. It should be noted, as well, that if you have had a bankruptcy over the past seven years and you may not qualify for working with a commercial loan broker. In many instances, a commercial loan broker typically only works with the most qualified candidates as it relates to obtaining business financing on your behalf. This is primarily due to the fact, that commercial loan brokers make most of their money on the contingency that they're able to secure your business credit facilities for you and your company. As such, prior to engaging a commercial loan broker you should have all the appropriate credit scoring documentation in place prior to working with one of these individuals or firms that specializes in securing capital for you. This, of course, will be a part of our continued discussions as it relates to working with a commercial loan broker for obtaining business loans, lines of credit, as well as other forms of financing for your business. Again, returning to the benefits of working with a commercial loan broker and will be able to provide you with a number of different financing options so that you can get the best possible deal for the business loan that you meet. Additionally, the benefits to working with a commercial loan broker as related to how many times your credit report will be reviewed by individual financial institutions. In most instances, a commercial loan broker will be able to pull your credit score from the three major bureaus in one time and then effectively shop it to potential financial situations that are looking to do business with your company. As such, the number of times that your credit report as it relates to working with a commercial loan broker should not affect your credit score. As it relates to credit scoring, each time that your credit is pulled by a financial institution, your credit score decreases by a small percentage. However, work with a commercial loan broker, the benefit is that these individuals are licensed to the pull your credit score one time. In the past 10 years, the issues as it pertains to working with commercial loan brokerages and credit scoring have changed drastically. This is primarily due to the fact that the banks and financial institutions have become aware that individuals are now shopping for the best possible terms and interest rate treats as it pertains to obtaining business loans and other types of credit facilities. This, again, is one of the primary benefits of working with a commercial loan broker.

 

In regards to the downside of working with the commercial loan broker the primary issue that you will face is that the fees can be extremely steep. This is primarily due to the fact that commercial loan brokers work on a commission basis. In regards to what you can anticipate as it relates to the fees for securing business loan capital under behalf, a business loan broker or commercial loan broker will charge a fee anywhere from 2% to 6% of the face value of the loan when they are securing capital at half. This is in addition to the $1000-$2000 that you may need to pay an upfront basis as they engage your case among a number of different lenders that are specific to your industry genre. In regards to upfront fees, most commercial loan brokers charge these fees in order to properly develop the documentation as required by the banks. In many instances, you would be required to pay these fees on your own if you're seeking capital by going from bank to bank. However, commercial loan brokerage firms have a number of different individuals on hand that can provide you with the resources that you need as it pertains to receiving business funding. As such, the upfront fees at you may pay, which are downside to working with a commercial loan broker, may be in your best interest as you progress through your capital raising activities. Typically, these upfront fees are used to defray the costs relating to credit reporting, the development of a business plan, as well as the development of a loan package that is appropriately presentable to lenders in the sphere of connections that your commercial loan broker has among a number of different lenders.

Among many websites, there is often a tremendous about of debate as it pertains to working with commercial loan brokers as it relates to obtaining financing for your business development and ongoing business activities. With the advent of the Internet, many unscrupulous individuals have entered the market as a commercial loan broker with the intent to take large upfront fees from their customers while not being able to properly deliver the commercial capital that they are seeking. As such, prior to working with any commercial loan broker, you should receive a full list of potential references that you can discuss their experience with as it pertains to the specific commercial funding firm that you are going to engage for your capital raising activities. Additionally, any commercial loan broker that you work with on an ongoing basis should have a well developed profile with the Better Business Bureau. The Better Business Bureau, as it pertains to commercial loan brokers, will be able to be able to provide you with a great listing of how this individual or firm has gone in the past as it pertains to capital raising activities. Additionally, you should also see a complete list of the successfully financed transactions that the individual commercial loan broker has engaged in during the course of their business career. More importantly, you should see recently funded transactions given the fact that the credit markets have is severely limited the amount of capital is now placed with new and developing business. This will further ensure that the downsides related to working with the commercial loan broker are limited as you will see that they have a successful history of placing financing for their clients. As such, having a track record with the commercial loan broker that you intend to engage will ensure that you are able to effectively receive the capital that you need from these third-party individuals and from tanks as well as other financial institutions. By having the appropriate reports in place, as it relates to the success of the specific commercial loan broker that you intend to work with, then you can rest assured that the individual firm that were that you're working with is able to produce the results that you need so that you can feel comfortable in providing them with some level of upfront fees as it pertains to comparing your business plan and on package. Unfortunately, as it relates to commercial loan brokers, this is a continued discussion that we are going have as we continue our series of articles in regards to obtaining business loans especially through the usage of commercial loan brokers.

 

Again, returning to our discussion as it relates to the downsides of working with a commercial loan broker, are the fees involved with successfully placing capital under behalf. Although, we mentioned earlier that the average commercial loan broker takes a fee anywhere from 2% to 6% of the face value of the loan -- this is an expensive proposition for your business. In those instances, especially as it relates to business loan capital, most commercial loan brokers will charge the full 6% fee of the face value of the loan if they are able to secure business credit facilities for your company. For instance, if you are seeking a commercial loan of $500,000, and you're working with a commercial loan broker, then you can anticipate that you will pay $30,000 to the broker in exchange for receiving this financing. In some instances, the fees that are taken by the commercial loan broker immediately deducted from the total amount. Returning to the basics of this example, if you are securing $500,000 of commercial financing that ultimately you will only receive a check for $470,000 as the 6% fee would be immediately deducted at the time of the business of closing. In other instances, an additional fee of $30,000 will be added to the loan amount so that rather than taking out a half-million dollar loan you are actually taking out a loan of $530,000 at league every year paid. This will be specified by your commercial loan agreement. However, while these fees are steep, these individual commercial loan brokers are able to effectively provide you with a capital that you need.

 

Among entrepreneurs is often the case that they immediately go to the nearest bank possible in order to receive the potential funding that they need. However, again, you are only exposing yourself and your business to one specific lender then we have a specific interest in your industry or the type of business that you operate. Returning to the concept of the benefits of working with the commercial loan broker, you will have a tremendous amount of exposure among lenders within the United States that are interested in your specific business and providing capital for your specific business need. Ultimately, as with the greatest benefit of working with a commercial loan broker comes in. Again, these fees can be justified by the fact that ultimately you will receive the services that you would need to perform on your own accord are being performed by a professional loan broker.

 

As you may come to quickly realize we were working with a commercial loan broker is that there is very little oversight and regulation as it pertains to business finance brokers. Unlike residential, commercial loan brokering is a facet of landing that still has not undergone a regulatory change. This is primarily due to the fact that many legislators often viewed commercial lending as something that is properly managed by the banks as they continue to review business loan applications, SBA loan applications, and applications for other types of financing for their business clientele. In a sense, the commercial loan brokering industry operates in a similar capacity to that is the private investment industry in that there is very little regulation involved as it relates to how they are able to secure capital under behalf. However, the fallout from the credit markets over the past three years, there is an anticipated change in the regulatory practices as it pertains to commercial loan brokers and associated entities. Foremost, many states are requiring commercial loan brokers to receive appropriate licenses that allow them to effectively raise business loan capital on your behalf. At the time of the writing of this article, there are proximally 20 states that do require that commercial loan brokers have licensure that is similar to that of the mortgage broker when they are placing debt capital. This trend is expected to continue as it is bit as there have been a number of crackdowns on the lending industry. Prior to engaging a commercial loan broker, we strongly recommend that you review your state's policies as it pertains to the licensure of business loan broker.

 

The Internet is a great resource for finding out as to whether or not the individual commercial loan broker that you're working with requires the necessary licensure to operate within their field. Many states now operate a number of different portals as it relates to lending operations, insurance operations, and commercial loan brokering operations. As such, you will be able to quickly find out as to whether or not the commercial loan broker that you're working with has the appropriate licensure, if that, do business with in your state. This should be the first step prior to working with any type of business loan brokering for. Again, when ensuring that the individual that you're working with has the appropriate commercial loan broker licensure buy also the appropriate track record as well making sure that you are not paying for something you are not ultimately going to receive especially as it relates to the business loan capital that you need for your work company.

 

The little things that we are also going to discuss as relates to working with a commercial loan broker is the inherent conflict of interest that comes with engaging individual or firm that seeks to secure capital on your behalf. It is important to remember that these individuals are primarily seeking to receive substantial commissions as it relates to their work as a commercial loan broker. As per our aforementioned example, a commercial loan broker can be compensated up to 6% of the total amount of funding secured on behalf of your company. As such, commercial loan brokers can receive substantial compensation if they are able to effectively work with their network of lenders when placing capital on your behalf. In our previous example, in regards to raising $500,000 for commercial activities, the commercial loan broker receives a fee of $30,000 for finding the appropriate lender for your business. As such, you can see why this is an extremely lucrative field and why many people that are for well versed in the commercial lending into this market with the intent to not only generate moderate upfront fees from the initial services they provide to you as it pertains to developing your business plan and loan package, but also from the large commissions that they receive for securing capital on your behalf. For residential transactions, as an example as to why mortgage brokers and commercial loan brokerage brokers work, the typical fee that is received by a standard mortgage broker typically ranges from 1 to 2%. However, there are certain ancillary fees that are charged by a mortgage broker as it pertains to residential transactions. However, commercial loan broker’s fees as it pertains to securing a business loan are substantially higher than that of their standard mortgage broker. However, the difference between a mortgage broker and a commercial loan broker is substantial. In many cases, a mortgage broker is simply a salesperson that is able to effectively take your application and presented to an appropriate number of financial stations so that you can secure the residential property that you are looking to buy for personal or investment purposes. In many instances, mortgage brokers to not have the same level of understanding as it relates to business practices, commercial lending, as was regulatory issues as it pertains to obtain a business loan. A professional commercial loan book or, however, does have these specific information and should have an extensive amount of experience as a pertains to the commercial lending industry.

 

When you decide to engage business activities with a commercial loan broker then the first thing they are going to have you do is to sign the agency agreement. This agreement would be a formal legal agreement between you and the specific commercial loan broker that is securing capital for your company. This document, will stipulate the upfront fees that are charged in regards to securing business capital as well as the contingency fees will be involved as a relates to commercial loan brokering services. Any time that you work with a commercial loan broker should always review, very thoroughly, the specific engagement agreements that are involved with having them provide you with the capital that you need for your company is developing for expanding operations. Any commercial loan broker that does not provide you with this agreement typically is not operating within the normal sphere of commercial business loan brokering. When it comes to reviewing the commercial loan broker agency agreement, if you're confused as to the language that is good in this agreement, then you should always have your attorney review it prior to signing any documentation for agreement between the your firm and the commercial loan broker. In many instances, by signing a commercial loan broker agreement, you agree to allow that specific individual to engage the capital raising activities that they are doing on your behalf for a specific period of time on an exclusive basis. This is primarily due to the fact that this individual commercial loan broker will look work extraordinarily hard in order to place the capital you are seeking. Additionally, as it relates to the commercial loan broker agency agreement, it should be specified as to specific types of capital that you are seeking then at the broker that will work on your behalf in order to secure the best terms possible as a relates to the business loan that you are seeking to obtain.

 

Again, the agency agreement between you and the commercial loan broker remains within your best interests as it relates to receiving a business credit facility. This, again, is the dichotomy that exists between an individual commercial loan broker and a client is seeking to make a sale than what receive a specific amount of income. For instance, and although this is not relates specifically to commercial loan brokers, you can view your relationship between a commercial loan broker and your company in the same capacity that you were have been relationship between you and a real estate brokerage. It is in the best interest of any broker that is operating on a specific commission basis to generate as much income as possible the commissions that they receive. For instance, if you're a purchaser of commercial property and have hired a real estate agent to find the best property for you then the real estate agent may not actually be in your best interest as it relates to finding a commercial residential property. This, again, is the to the fact that a real estate agent wants to receive the highest commission possible and may not work in your best interest when looking for something that is suitable to you. The same holds true when working with a commercial loan broker. These individuals are, again, operating on a commission basis as it pertains to securing capital on your behalf. As such, you need to be aware of the fact that the individual commercial loan broker that you're working with should focus on working with traditional funding sources such as banks, licensed finance companies, or other lenders that are able to provide you with conventional business loans Small Business Administration backed business loans. You should always avoid commercial loan brokers and immediately seek to place the funding you need with hard money lenders. This is primarily due to the fact that there are substantial upfront fees that are associated with receiving bridge financing for hard money financing as it relates to business activities.

 

In conclusion, working with a commercial loan broker can be an excellent experience if you pick a specific individual or firm that had effectively assist you with raising the capital that you need for your company. Again, there are number of upsides and downsides when working with a commercial loan broker. It is imperative that you focus on working with a firm that does have a proven track record of securing capital on behalf have of their clients. It is also important to note that you should thoroughly review any type of commercial loan broker agency agreements that you receive from the company that you intend to work with as you progress through your capital raising activities. Again, if any of these concepts work documents seem foreign to you then it is imperative that you have a certified public accountant and attorney review these documents so that you can make sure that the individual commercial loan broker or firm that you're working with doesn't tend to work on a best efforts basis in regards to providing you with a credit facility that is most appropriate for your business. In making wise choices as it relates to working with the commercial loan broker, you will save yourself a tremendous amount of headache and heartache as you progress through your capital raising activities. Time and time again, we've seen a number of different entrepreneurs suffer because they have worked with unscrupulous individuals in the commercial loan brokering field. As such, doing your homework as to the individual commercial loan broker that you're working with will save you a tremendous amount of money and time when ensuring that you are able to properly receive the capital that you need in order to help expand your business.

 

On a side note, you should be aware that a good commercial loan broker will immediately inform you as to whether or not your business is an appropriate candidate for commercial financing. In many instances, especially if you do not have good credit, a commercial loan broker should be able, at minimal expense, to inform you as to whether or not they're willing to take your case as it pertains to your business funding needs. In the instance where you do not qualify for business loan then you should not pay upfront fees to a commercial loan broker so that they can effectively develop a business plan were commercial loan package under behalf knowing that you're not going to qualify for any type of business that financing.

 

Finally, again, a commercial loan broker is an excellent way to gain a tremendous amount of exposure among hundreds of different lenders throughout the United States and all  term sheets that provide you with the vast possible terms and confidence as a relates to your business capital needs. We strongly recommend that you continue to review the number of articles that we have as it pertains to business loans, commercial loan brokers, and other types of financing in order to launch, develop, port standard business operations. We also recommend that you review our specialized package that defines resource has developed in regards to obtain business loans, developing appropriate business plan for debt facilities, and providing you with lists of lenders as it pertains to specific industry genres that they like to lend to. Thank you for tuning and will continue to provide you with new insightful information as it relates to commercial loan brokers and other types of financing.



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