For many businesses, taking out a loan is one of the biggest decisions there is. Many businesses choose to be supported through the process by going through a broker, who negotiates and arranges loans for a living.
Working with a broker comes with many benefits. Commercial brokers have a detailed knowledge of the lending market and can connect your business needs with relevant bank managers. A broker should gain an in-depth understanding of your business and financial situation, and seek terms from multiple lenders before approaching you with the choice of options available to you.
This is especially helpful in light of Covid-19 and the Coronavirus Business Interruption Loan Scheme (CBILS). Although the criteria for these loans are incredibly harsh, brokers should be able to give insight into your likelihood of being accepted, but will also help package up your business’s information in a way that is most palatable to bank managers and thereby improving your chances.
Unfortunately, not all brokers show the same dedication to the clients that they serve. Over the years, I have known brokers who simply send a name and phone number to a bank manager over email – and charge their client an upfront fee for the trouble. Being able to present to bank directors and look at the intricacies of your business’s cash flow and financial projections can be tough, even for experienced commercial lending brokers – let alone those with no prior sector experience.
Especially in times like this, when businesses are vulnerable, it’s important to make sure that the value and service you receive aligns with the costs.
When looking for a broker, you should look for tell-tale signs of quality to ensure that you get the best deal.
The first thing you should look at is whether the broker is registered with the NAFCB, FIBA and is FCA accredited, ensuring that the service they provide adheres to a professional industry standard.
Secondly, it’s worth asking about their fee structure. Good brokerages won’t charge you for an initial consultation (saying hello and gathering basic details) and will instead assess your business, talk about your needs and see if there’s a chance that you could be accepted for a loan in line with your requirements, before engaging with you in a formal and paid-for manner. They should also be upfront with the fees they charge and what the whole process is likely to cost your business.
Whether you are applying for CBILS, or any other loan, it can be hard to know as a business owner what your chances are of being accepted. A good broker would much rather assess your business and give you a quick ‘no’, instead of a costly and protracted 'yes'.
It’s worth noting that brokerages are people-run businesses, fuelled by reputation and good words from happy customers. If they have been around for a while and have worked with some well-known names, then you’re probably in safe hands. It’s worth doing your research to see what others have said.
Ultimately, the world of broking is a mysterious one and while a lot of these points seem like common sense, to many they’re not. If they aren't obvious, you should familiarise yourself with them. When you’re looking for critical capital for your business, it’s always good to consider the options of your costs. Don’t make desperate decisions and quickly choose a broker without due diligence, lest you could fall into the trap – at potential detriment to your business.