How to Choose a Commercial Loan Broker You Can Trust
By Jeff Bardos, CEO, Speritas Capital Partners
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There are thousands of local, national and online bank and non-bank lenders. Figuring out which ones are the best match for your business takes a lot of time and effort. That’s why many businesses use a commercial loan broker to find funding. Loan brokers can save a business both time and money.
Commercial Loan Broker Caveats: The trick is obviously finding the right commercial loan broker for your business. Fancy websites are easy, but knowledge & experience can’t be faked. Trust and character are extremely important.
After talking with a broker, be sure to do some online research. Check LinkedIn profiles, visit their website (and look for blog posts and articles that show real knowledge). Do your homework!
A good commercial loan broker is a strategic thinker. They’ll help you determine an appropriate and sustainable funding strategy and can quickly identify potential lenders with the right financing structure and the best terms.
A good loan broker has strong relationships at each potential lender and can rely on those relationships to get you quick feedback. Lenders like to deal with smart, experienced brokers, and respond more quickly to the brokers that they know and respect.
The commercial loan broker/consultant industry isn’t well regulated, so it’s easy to pick the wrong broker. Make sure you ask a lot of questions and review the brokers’ online information.
If you’re struggling to find a good broker, use my ‘what to look for in a broker’ checklist below. Or simply give me a call/text at 203-247-4358! I talk to dozens of borrowers every week and I can tell you right away if we can help.
15 Tips to Find an Experienced 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, strategic 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 ALL 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 will 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 without full disclosure to both parties.
- 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.
- 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 constantly 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.
- 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. They’re smart, analytical and see the big picture.
- 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.
- 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 These Three ‘Bad Broker’ Scenarios…
- 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. Broker chains can be expensive and make deal difficult to close. Lenders really don’t like broker chains. We love to work with other brokers or advisors who need our expertise, but we don’t do chains.
- 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 and waste critical time.
It’s hard to find a commercial loan broker with the experience you need to get funded, and who you can trust to give you honest answers. Luckily, you’re in the right place! Speritas Capital is here to help you think through your funding options and connect you with the right lender. Our reputation and respect with lenders is what makes us different.
Schedule a call with the author, our CEO Jeff Bardos, or call/text him at 203-247-4358.
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 30 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 complex credit, collateral and cash flow situations and we never take upfront fees.
Telling your story is often what gets you funded. You may be interested in reading more. Check out my article on Crafting the Perfect Loan Pitch in 13 Steps.