As a small business owner, sometimes it seems like you have the weight of the world on your shoulders. You have decisions to make about every single aspect of your company, and each one can eventually make or break the future of your business.
The Problem of Financing
One of the biggest decisions you will have to make is how to get financing. Whether it’s financing at first launch or when you’re looking to expand and grow, the job of finding money can be difficult. With so many options out there it can be hard to know how to find the right financing from credible lenders.
This is where a loan broker comes in. Just like a real estate broker knows the real estate industry and works to find you the perfect house, a loan broker service knows the financing world and works to match you and your business with the perfect financial offer.
Why a Loan Broker is Better Than a Single Lender
You might be wondering if going to a loan broker is really necessary. After all, you can just talk to a bank at some point and get financing that way, right? Contacting the lender directly in this way might seem like a good idea, and it does actually have some pros that make it appear to be a strong option. First, you cut out the middleman and talk directly to the institution providing your capital. Second, cutting out that middleman means you don’t have to pay the broker, who would require a fee for the service.
These might sound like bonuses, but the truth is that contacting lenders directly can be very tricky, especially for new, small businesses. If you are just trying to get your idea off the ground, most lenders are going to be extremely wary about lending their money to something they see as an extreme risk. In fact, major banks are disallowed from lending to businesses that can’t demonstrate a history of cash flow and positive revenue of at least three year. Even with a perfect business plan, the general failure rate of new companies means most financial institutions aren’t willing or able to take that sort of risk on behalf of their banking customers who provide the funds being lent through their savings accounts.
The other main problem with contacting a lender directly is that you limit yourself with options and payments. Unless you are willing to contact dozens of lenders of different types, you wind up stuck with an offer that might not really be the best fit for you and your business.
Loan brokers avoid both of these problems through their network of lenders and identifying the right lenders to match to you and your company. You might be brand new; you might be well-established and looking simply to expand. Either way, a loan broker can match you with the perfect fit for your business.
Why a Loan Broker is Better Than an Online Marketplace
Another option many businesses consider when looking for capital is the online marketplace. Like a loan broker, the online marketplace provides access to a variety of lending institutions. So, it seems like it’s just as good, right? Since it is online, it has to be easy to sign up.
While that might be true, the fact is that an online marketplace simply doesn’t offer all of the services a loan broker can.
For example, while online might seem easy and convenient, what it really means is impersonal. You fill out a form and click some buttons, and an algorithm does the rest. For many existing businesses, the loan limits available through these online lenders is not enough, or the options have exorbitant rates that make them unusable.
In addition there is no consultative approach. You see an offer, you take it or you don’t. With a loan broker service, you have a genuine connection with real, experienced loan brokers and business people who are committed to finding the best financial solution for you and your organization. These brokers know you and your business, and they can look past the numbers to find the perfect match for what you need.
Another reason loan brokers are better is because they offer access to more options, such as invoice factoring and sale leaseback. Often, many small business owners aren’t aware of all of the options available, and an online marketplace simply isn’t going to know enough to find those knowledge gaps and fill them in. This means that many small business owners end up accepting offers that might not have been the best fit, but they just didn’t have the information they needed to make the right decision.
A final reason to go with a loan broker is because they can often put you in contact with specific types of institutions that are targeted to your exact objective. Looking to expand? Purchase equipment? Move locations? Each one of these goals needs different types of lending, and a loan broker knows the lenders that have a history that supports businesses like yours in a similar market or with similar goals.
For all of these reasons and more, a loan broker is definitely the best choice when looking for lenders. If you’re looking for new money, please contact us to talk about your business plan. We will advise you on options for funding based on your objectives.