When you’re borrowing money for commercial purposes, you might typically be looking for a number of things:
- a speedy decision on your application;
- reasonable acceptance criteria, rather than those which appear to be designed to avoid any possibility of anybody ever succeeding in their application;
- a pricing model that’s sensible and affordable in your context (that might not always be the same thing as the “cheapest”);
- a commercial customer-centric orientation on the part of the provider, supported by efficient administrative systems;
- someone that understands the specifics of your business domain – at least to some degree.
This brings us to the subject of the commercial loan broker.
What is a commercial loan broker?
At face value, you’ll probably think that you’re surrounded by borrowing options. Certainly we at ACF Direct know of a large number of such.
You may see plenty of advertisements and understandably, they’ll portray a very rosy picture of their loan propositions. However, there are potential problems in that perception:
- some loan products might not be applicable in your circumstances. For example, if a given lender has a very high credit scoring threshold and you don’t meet it, then your application is unlikely to be successful;
- some loan products might be simply more suitable for you than others. An illustration here might be deciding whether invoice factoring or invoice discounting is more appropriate for your business in a given situation;
- of course, pricing can also vary hugely. The final cost of borrowing isn’t always easy to tell at a glance and costs can increase rapidly once the lender knows the full picture as it relates to your business.
A commercial loan broker will quickly analyse your business requirements and from that, they’ll know from experience which sources of funding are likely to be a good fit for your needs. They can make recommendations and/or arrangements to facilitate the loan rapidly.
Why not do it yourself?
This might sound tempting but it’s worth keeping a few points in mind:
- an experienced commercial loan broker may have access to sources and pricing models that you, as a non-specialist, simply won’t know of;
- it may be necessary to ask yourself if you have the time to trawl the marketplace and pick up the skills necessary to complete this task. Your time is money. So, it might be sensible to speak to someone who already has all this knowledge available to hand;
- don’t forget the important fact that making lots of loan applications, hoping to secure an offer, just isn’t a sensible approach. That’s because every time you’re turned down for a loan, it will be recorded on your credit history files and that might adversely affect your chances of securing finance or push the cost of doing so up.
A professional commercial loan broker will never have a pre-defined solution in their mind and it’s important to be sure that they’re regulated by the Financial Conduct Authority (FCA).
They will need to understand something of your business before they can even begin to consider options for lending and sources of finance. So, you should have no concern that you’re receiving a one size fits all proposition.
Of course, such organisations are commercial and as such, they must make a profit. How they do so in terms of fees and commissions may vary.
As in any commercial transaction, you should examine carefully the costs you’ll be paying directly or indirectly, prior to signing any contract with a commercial loan broker or indeed a final provider of funds.
If you’d like to know more about the role of a commercial loan broker, why not call us for a discussion. We’re here and waiting to help!