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Loans Brokers vs. Digital Lenders

Most business owners will seek a capital loan at some point in their careers.  Luckily, we live in a world where there are a variety of lending opportunities readily available. Traditional banks, alternative lenders, and digital lenders have all become go-to sources for capital. Understanding the pros and cons of each funding source will help you choose the best fit for your business.

Benefits of each

Each lending source is going to have their own benefits. For example, traditional banks are going to have some of the lowest rates. Because banks are allowed to lend out the majority of the funds which clients have deposited into the bank, they can offer lower rates to customers who make it through the application process.

Digital lenders, on the other hand, are easier to work with than banks.  They tend to keep the application process simple, often only requiring a single form. This allows even inexperienced borrowers to comfortably navigate the financing process. Digital lenders also are likely to be more lenient on the borrower profiles that they will lend to. Many digital lenders will approve borrowers even if they have a poor credit history or little collateral, allowing them to quickly approve and provide loans.

Loan brokers offer the broadest variety of financing vehicles.  They work with your company to understand your needs and opportunities in order to place your business with the best fit lenders. Instead of focusing on a limited scope of funding options, they form connections with lenders to create a more extensive library of loans. This competition creates better rates for borrowers.  If you choose the right broker, they will make the market compete for your business.  This generates the best offers and lowest rates for clients.

An additional benefit of loan brokers is the inclusion of an advocate throughout the process. Some loan brokers – such as our firm – only get paid for success.  In other words, our bottom line is based on providing you with the best lending solution in the market.  If we do all of the work and then the deal falls through, or if you find a lower rate elsewhere, we don’t get paid a dime.  Loan brokers like this become your advocates, working with lenders on your behalf to secure the best lender, package your loan, overcome obstacles along the way, and make sure you get a funding offer that you love.

Why choose a loan broker over digital lending?

Digital lending may be easier and faster, but that doesn’t always mean it is better.

  • OPTIONS: Digital lenders usually offer a small number of financing options, which can require placing clients in a financing solution that doesn’t truly fit.  On the other hand, loan brokers offer a myriad of loan types. They work to evaluate your needs and then customize their lending packages to your company.
  • RATES: The quickest and easiest to use digital lenders tend to have exorbitant fees and rates. Often they are cash advance lenders, who provide rapid access to money in exchange for high-interest rates and numerous fees. Many leading online lenders have rates that are well above 50% when calculated annually.  In contrast, loan brokers are tasked by their clients with sourcing the lowest available rates across all lenders in the marketplace.
  • CONSULTING: In creating a one size fits all, quick and easy to use, cookie cutter financing process, most digital lenders have cut out personalized consulting from their service line up.  Their role is to provide one type of financing and to do so in a way that makes it as convenient as possible to obtain.  Loan brokers, on the other hand, are fundamentally consultants.  They interview each client, identify their needs and opportunities, and create a custom financing solution that is the best fit for that unique company.  They then construct your loan package and pitch it to multiple lenders, gathering feedback, refining the offer, and continuing until the funding is secured.

There are many situations when ease is more important than the quality of the outcome.  But when it comes to business loans, it is critical to making sure you are getting the best solution available for your company.   This means exploring all of your options, having lenders compete for your business, and getting the lowest rates available.  If you’d like help with achieving this, our team is standing by.