The Case for Hiring a Loan Expert We turn to doctors, lawyers, and accountants to apply their areas of expertise, so why aren't business owners working more often with commercial loan brokers to source the most beneficial type of capital?
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Assessing the right type of small-business loan is both time consuming and complicated. There are dozens of financial products available, and even more banks and non-bank lenders to choose from. So, how will you decide which product is right for your business, and what type of research is needed to determine which financial institution to select? These are just a few of many required questions.
Business owners regularly rely on industry experts when making decisions — they use accountants, lawyers, benefits consultants, real estate mortgage brokers and many others, and do so because associated decisions can have major impacts on the success of an enterprise. I'd actually put a business-financing expert near the top of that list, specifically a commercial loan broker. This person will have the ability to analyze your needs, goals and objectives to determine what the right lender should be. They also help explain all available options, and even negotiate on your behalf. As a busy entrepreneur, they can help save time and streamline an arduous process.
There are also some additional benefits.
An experienced commercial loan broker will look past the dollar amount and first ask a simple question: "Why do you want to apply for a loan?" It's crucial to understand that all loan programs are not equal, and brokers know that the first step to finding the right one is pinpointing need. Once a broker knows that, he or she will build an application and source lenders that accomplish your goals. When the right one is picked, they also have the expertise to understand rates, terms and covenants, and can warn of potential pitfalls.
A ready lender network
Reputable brokers have established and vetted networks of professionals that offer options based on a business's needs and qualifications, which helps avoid spending weeks, if not months, speaking and meeting with lenders — and perhaps still not getting financing, or winding up with the wrong type (which can easily be more harmful than having no financing at all).
I often find that small-business owners know how much money they need in a loan, but after discovering why they need it, I realize that it will take multiple solutions to properly finance them. A B2B company seeking both working capital and equipment, for example, should be looking for a line of credit or invoice financing solution to solve day-to-day working capital needs, while a lease might be a better option for purchasing the equipment. Each product is designed for a specific need and should be used in the proper way.
Of course, it's vital to do proper research before hiring a commercial broker. First, make sure they have a professional website with working contact information. Request recommendations from other business owners and read client references and reviews, and never be shy about asking as many questions as you need to.
While doing this research, there are a few red flags to keep in mind:
- Lack of references or reviews from real customers.
- Either the absence of a proper business number, or that number always redirecting to an automated recording.
- No physical address listed on a website.
- Any "guarantee" that you'll get approved for a loan.
- No available information about owners or key employees on the business site.
All of your careful research will be well worth it: Once you do hire a qualified professional, you'll save yourself time and the headache that so often comes with the loan process.