Using a Commercial Loan Broker

Commercial loan brokers can be an invaluable resource to you if you are seeking business funding. However, there are many positives as well as many negatives when working with this type of firm. Foremost, the best benefit that you will receive when working with a loan broker is that you are able to have your funding request reviewed by several hundred different lenders. These firms often maintain expansive databases of banks and financial institutions that are seeking specific types of loans among borrowers that have varying credit qualities. As such, if you have a unique capital need or have had credit trouble in the past then you may want to consult with a business loan broker regarding these issues. These firms also tend to have connections with private investors, and they can potentially give your proposal to third parties if you do not qualify for traditional debt financing.One of the negatives of using this type of firm to secure capital is that the fees are extremely high. It is very common that a loan broker will charge 3% to 6% of the face value of the loan if they are successful in completing your funding request. In many cases, these very high fees are immediately deducted from the proceeds that are disbursed to you. As such, you should make sure that you can appropriately afford this additional cost when you are entertaining the idea of working with a capital brokerage.Most importantly, prior to working with any funding broker, you should check all applicable references and licenses that are required by the company that is providing you with these services. There are many unscrupulous firms that are primarily seeking to have you pay large upfront fees without ever delivering on their promise to assist you in securing business capital. The only fees that should be paid to a broker prior to a loan closing are those that relate to document preparation or business plan development. Usually, these fees are approximately $500 to $1,000. Again, the best way to ensure that these upfront costs are being used appropriately is to speak with clients that have worked with this particular business in the past.Once you have decided to work with a capital brokerage, the company will send you a number of documents that you need to review and sign. We strongly recommend that your attorney review these documents to make sure that they are in line with all applicable state and federal laws as it relates to loan brokering. Additionally, your hired firm is going to need several pieces of financial information from you including your formal capital request, information pertaining to your business, and an overview of your personal financial history. In many cases, this firm will have the ability to immediately review your credit score as it relates to securing business funds.In closing, by working with a commercial loan broker you are in an excellent position to receive the business debt that you need. However, it is imperative that you complete an extensive amount of due diligence prior to working with any company that acts in this capacity.

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