Business Loan Brokerages: Pros
and Cons
You may be aware of this, but
there a number of firms that can actively assist you as you looking for business
loan. These firms are commonly known as loan brokerages. They work in a very
similar capacity to that of a mortgage brokerage firm but with a specific focus
on business loans. However, before engaging a business loan brokerage you should
be aware of a few things. Like with any industry, there are a number of
unscrupulous firms and individuals that seek to take advantage of people that
are not privy to how the industry works. In regards to loan brokerages, you
should be wary of any firm that requires substantial upfront fees before
assisting you with obtaining a business loan. However, some of the fees
presented by a loan brokerage can be reasonable. For instance, fees for business
plan development and credit reports should be reasonable while several thousand
dollar retainers for simply taking on a project are not. When working with a
business loan brokerage you should always perform your own due diligence. Does
this firm have references? Are they are member of the Better Business Bureau?
What is their success rate?
Once you find a firm that you
want to work with when looking for business loan then it is time to begin
negotiating the fees. Typically, most business loan brokerages charge a fee
ranging from 2% to 10% of the successfully raised capital. Again, this is
subject to negotiation. If you have a substantial amount of collateral, an
excellent credit score, and a solid business plan then the fees should be lower
as your chances of obtaining a business loan are much higher than people that do
not have the same qualities.
One of the pros of working with
a business loan brokerage is that you can quickly receive a number of loan
offers from a number of banks and lenders within days of submitting your formal
application. Additionally, the business loan brokerage can assist you immensely
with developing the appropriate application and business plan so that your
business loan request can be processed faster than if you did it on your own.
One of the primary negatives to working with a loan brokerage is that they can
charge substantial fees for their services. However, these fees can be justified
if the loan brokerage is legitimate and able to secure a business loan on your
behalf.