A business loan broker is an individual who acts as an intermediary between two agencies or individuals. In the case of business loans, the broker is the intermediary between the lending agency and the borrower. These brokers are usually employed by the lending agency to negotiate the specific terms of a loan with borrowers.
Business loan brokers do not have any authority or ownership over the services offered by lending agencies; rather, they are salespeople who communicate the interests of both parties to secure business loans. Once a contract is established, the borrower pays the broker, who then pays the lending agency. In return, the broker earns a commission for the transaction.
Because lending agencies have a multitude of different types of loans, business loan brokers also act as informants to borrowers. Brokers explain the loan options available to the individual and help him or her decide which is the best decision by taking into account the amount of money needed and its purpose. They also analyze the profitability, practices, tax history, and credit profile of businesses in need of loans to make sure the lending agency’s money will not be put at too high of a risk. Borrowers and lending agencies prefer to work with brokers because the broker understands the needs and interests of both parties, which makes it much easier to conduct business.
A business loan company generally refers to a lending institution that provides loans to businesses for start-up or operating expenses. Common lending institutions are banks, the Small Business Administration, and financial companies. Each lender differs in amount of funding provided, collateral, interest rates, and repayment options.
Business loan companies usually require the same documents and information in order to be considered for a loan. Company financial statements, along with financial statements of each owner of the business, are needed to estimate the financial stability of a company. A business with a stable financial history is more likely to receive more funding at lowered interest rates. Lenders who loan large sums of money or fund start-up businesses may also require a business plan that outlines the goals of the business and how the funds will be used. Lenders also consider equity, the amount of money invested by the owner.
The two basic types of loans provided by most business loan companies are secured and unsecured loans. A secured loan requires the borrower to provide assets as collateral to back up the loan. If the loan is not repaid, the lender has the right to seize the collateral. However, an unsecured loan is only held by the borrower’s signed promise to pay. Though no assets are at risk, unsecured loans usually carry higher interest rates, and failure to repay could do substantial damage to a borrower’s credit report.