Shopping locally helps small businesses in your community; and using a local loan broker can help your small business get the best financing option.
Trying to find the best business loan on your own is tough. The Federal Reserve suggests small business owners spend a minimum of four days searching for a loan, time many simply can’t afford. And four days is likely not enough time for those who are not familiar with the financial industry, given all the options available from major banks, alternative financing companies, payday loans and others.
By using a broker, you can save time and potentially money. A local broker will have in-depth knowledge of your community and connections with a broad national network, something few individuals outside the industry can match. They will check with a network of lenders to get you the best loan options. That way you don’t have to apply to a lot of different lenders, which could potentially hurt your credit score with too many applications.
While you may be an expert in your own industry, a broker will be able to navigate the complexities of financing in terms you can understand. By using a broker, you will get the personalized attention and someone to advise you on the best direction based on your business needs. They’ve seen it all in terms of financial situations, so it’s likely they have experience with your particular case.
Good brokers are particularly helpful for those small businesses that don’t qualify for loans from major banks, which may have onerous requirements, such as three years of financial documents and collateral.
Options such as payday loans might appear to be a time saver for small business owners who need to get money quickly, but the high short-term interest rates can cost far more in the end. Payday loans generally carry fees or interest rates in the neighborhood of 15%, which for a $100 two-week loan adds up to an APR of 390% when calculated over 12 months.
Many brokers are well versed in alternative lending companies which have more flexible requirements and terms than other financing options. For example, BFS Capital offers small business loans of up to $2 million as well as merchant cash advances, and works with brokers, under its ISO program, to provide the best deal to clients.
What You Need To Ask
As with any industry, there are both good and bad. Although working with a broker can save you time and potentially money, you need to be careful about choosing the right person and asking the right questions. The following are some suggested questions you should ask a broker before deciding to work with them.
- What will the broker be paid for arranging the loan?
- How successful is the broker’s own business, i.e., how many loans and for what amount does the broker record annually?
- Is the broker able to provide client references?
- How does the broker find new clients?
- Has the broker worked with other small businesses in the same industry?
Finally even though your broker has arranged your loan and worked on your behalf, you still need to carefully read the loan agreement and ask any remaining questions you have before signing it.