What Is a Business Loan Broker & Should You Use One?

Securing a business loan isn’t always straightforward, especially if you’re short on time, operate in a niche industry, or don’t know which lenders are most likely to say yes. That’s where a business loan broker can help.

These financial pros act as a bridge between you and potential lenders, helping you find financing that fits your needs and guiding you through the application process.

A broker can be convenient, but their services come at a cost, and not all brokers operate the same way. Here’s what to know before you decide whether to work with one.

What is a business loan broker?

A business loan broker, also known as a commercial loan broker, is a financial professional who helps businesses find and secure financing by matching them with suitable lenders.

These loan brokers work independently but leverage their contacts to help you get a business loan that best fits your situation on competitive terms. When you need commercial financing, business loan brokers will contact lenders, negotiate on your behalf, and guide you through the loan application requirements and process.

But a broker charges fees and commission for their services, and in some cases, they may encourage you to take out pricey loans, particularly if their compensation is tied to the loan amount or its terms. 

Loan broker vs. loan marketplace

Loan brokers and loan marketplaces both provide small business owners with financing options, but they work in different ways.

A commercial loan broker is an individual with deep knowledge of the market for business loans and the lenders and banks that are seeking borrowers. Brokers guide clients through the procedure of determining financing needs, sorting through the various loan products, managing paperwork, and helping the company negotiate loan terms. 

A loan marketplace typically refers to an online platform that serves as a digital matchmaker. You provide information about your business and what you’re looking for, and the platform presents automated offers from its partner lenders. The lenders contact you directly to finalize terms. Fundera, Lendio, and LendingTree are all examples of loan marketplaces.

Using an online loan platform could make sense if you:

• Want more control over the process

• Don’t operate in a high-risk industry, such as firearm or cannabis sales 

• Have stable revenue 

• Don’t want to pay a higher interest rate

Hiring a commercial loan broker could be helpful if you: 

• Don’t have a lot of time to dedicate to the process 

• Operate in a niche or high-risk industry

• Need hands-on help with the loan application

A loan marketplace can also refer to the vast market of different lenders and loan options you can shop yourself. This entails researching banks, credit unions, and online lenders individually, then contacting the lender and applying for the loan that best fits your financial needs.

How to work with a loan broker

1. Find a loan broker
2. Have a two-way conversation
3. Gather documents
4. Review your broker’s proposal
5. Negotiate with the lender
6. Select your lender and loan product
7. Receive funding and pay broker

If you’re new to working with a business loan broker, here’s how it usually works: 

1. Find a loan broker 

You can search online for a small business loan broker in your area for a quick and direct approach. Or, someone at your local Small Business Administration Development Center can help you find a broker or brokerage firm. You can also ask another business owner or a colleague for a referral. 

2. Have a two-way discussion

Once you contact a commercial loan broker, schedule a consultation to discuss your business financing needs. Let the broker know how you will use the loan proceeds and how much you want to borrow. They may ask questions about your business, such as your industry, years in operation, annual revenue or profit, and credit rating.

At the same time, ask the broker questions about their fee structure, credentials, and experience in your industry. If you’ll be responsible for paying their fee (rather than the lender paying it), make sure it fits with your budget.

3. Gather documents

The loan broker should give you a checklist of documents you need for the loan application. These may include:

• Personal and business tax returns

• Profit and loss statements 

• Balance sheets

• Bank statements

• Business licenses and/or incorporation papers

• Contracts or invoices if the loan is tied to a specific project

4. Review your broker’s proposal 

The broker takes your loan application and contacts lenders in their network who are likely to approve your loan request. Then the broker will present offers with details, such as:

• Loan amount

• Interest rate

• Term length

• Fees 

• Total repayment cost

Your business loan broker should go through the main pros and cons of each option and answer questions about terms and obligations.

5. Negotiate with the lender

With several offers in hand, the business loan broker will negotiate on your behalf. They may try to get better rates and terms or lower fees. This step is more common for businesses that are borrowing a large amount or have strong credit and finances. 

6. Select your lender and loan product

It’s time to choose the lender you want to work with and the loan product you want. Your broker will coordinate with the lender for final underwriting and closing requirements. You may need to provide additional documentation, answer questions, and sign loan agreements.

7. Receive funding and pay broker

Once the lender approves your business loan, it will transfer funds to your business bank account. The broker gets paid either by the lender, by you, or both, depending on your arrangement.

How to choose the right loan broker

Once you find a loan broker, consider the following before deciding to work with them.

Fees

A loan broker should be upfront about how they’re paid. Typically, brokers charge a fee that equals a small percentage of the total loan amount, typically 1% to 3%. Some brokers may also charge an upfront flat fee.

They should clearly explain whether their fee comes from you, the lender, or both, and whether the fee is a flat rate, a percentage of the loan, or built into the loan cost. Avoid brokers who dodge fee questions.

Certifications

Check if the broker is licensed or registered in your state. Some states require this. Membership in professional associations can also signal credibility, indicating that the broker has attended professional training programs. Look into: 

• Small Business Finance Association Broker Council

• American Association of Commercial Finance Brokers

• Commercial Loan Broker Association

Experience

Choose a broker who understands your industry and has a track record of matching similar businesses with the right lenders. An experienced broker can save you time, steer you away from unsuitable products, and help you avoid hidden costs.

Red flags

Be wary of brokers who:

• Push only one loan option without showing alternatives. This could mean they’re motivated by commissions, not your best interest.

• Promise loan approval—no broker can guarantee funding.

• Pressure you to act immediately without giving you time to compare terms.

• Request large upfront fees before doing any work; reputable and successful brokers are usually paid once you secure funding at closing.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.