How To Choose a Commercial Loan Broker You Can Trust
By Jeff Bardos, CEO, Speritas Capital Partners (Jeff’s Bio)
There are hundreds of local, national and online bank and non-bank lenders, but figuring out which ones are the best match for your business takes a lot of time and effort. This is where using a commercial loan broker can help save a business owner both time and money.
A good commercial loan broker will help you determine an appropriate and sustainable funding strategy and can quickly identify potential lenders with the best terms. They’ll have strong relationships at each potential lender and can rely on those relationships to get you quick feedback.
The trick is finding the right commercial loan broker for your business. Fancy websites are easy, experience can’t be faked. Check LinkedIn profiles and do your homework.
The commercial loan broker/consultant industry isn’t well regulated, so it’s easy to pick the wrong partner. I’ve met a lot of brokers and know that their skills and trustworthiness vary widely. Many of my clients have expressed how difficult it was to find the right broker, so I thought it would be helpful to put together a list of things to think about as you’re selecting a commercial loan broker/advisor.
15 tips to help you find and choose an experienced and trustworthy commercial loan broker
- Your broker should not take up front payments or fees. Brokers should be paid on success.
- Your broker should have financial industry experience and understand the needs of businesses like yours. They should be creative and think out of the box.
- Your broker should not try to sell you a specific financial product that may not fit your situation. (I see this fairly frequently.) Instead, the broker should listen to your story and discuss the pros and cons, and long term impact, of the different financing options that could apply to your situation.
- A responsible broker will tell you if your deal is bankable and refer you to an appropriate commercial loan officer at one of the broker’s bank partners.
- A trusted broker will select the right lender for your business, regardless of the size of the broker fee. They should care more about long-term relationships than a single fee.
- A good commercial loan broker will not take fees from the lender and from the borrower on the same deal.
- An experienced broker will be able to give you an indication of what financing terms and rates may be possible, what your chances are of receiving funding at the rate you desire, and will not mislead you or waste your time.
- The best commercial loan brokers have strong personal relationships with a wide network of lenders in a variety of specialties and products – from private lenders, banks, family offices, etc..and are always developing new funding sources.
- A good broker will know which lenders have an appetite for particular industries and credit situations and how aggressive they may be on rate, in order to present you with the lowest cost of funds.
- Your broker should have good relationships within the local banking community and will be a respected member of that community. Bank loan officers will refer their valued clients to a handful of experienced, trusted brokers when they cannot help a client obtain funding. Your broker should be one of them!
- Your broker should be a member in good standing of local and national financial associations.
- A knowledgeable broker can discuss the pros and cons of each type of loan under consideration, and will help you assess the merits of multiple term sheets.
- A trustworthy broker will tell you exactly what the total cost of your loan is and the exact fee they are making on your loan.
- Your broker should be able to review your loan documentation and provide expert answers to your loan documentation questions. They will help keep the process on track.
- Your broker should work for you and present your business in the best possible light.
Watch out for…
- The scattershot broker. These are commercial loan brokers that send your deal information to every lender they know hoping that something sticks. This is an improper use of your proprietary information and a waste of time.
- The broker chain. As discussed in a previous blog, some commercial loan brokers will work through another broker to find the right lender. This is okay as long as all the brokers involved are disclosed and you agree to all fees up-front. A broker chain can involve multiple brokers and possibly multiple fees. They can be expensive and difficult to close.
- The bait-and-switch. You should ask your broker why they believe they can find a lender at the desired rate, maturity and fees. Some brokers will promise the world but not be able to deliver.
Other posts of interest: Crafting the Perfect Loan Pitch in 13 Steps
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 25 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
Speritas Capital Partners specializes in difficult credit, collateral and cash flow situations and we never take upfront fees.