Many of us are avid "do-it-yourselfers" (DIYers). There are television networks and countless internet sites that celebrate and encourage those of us who are predisposed to "do it ourselves." I find that business owners, independent by nature, skew heavily towards the "do it yourself" end of the spectrum. Many times, that approach benefits them greatly; they save money or get a better outcome than if they had hired someone. However, there are times when many of us underestimate the amount of time we will have to invest in a task or overestimate our ability to do it well. (Anyone else ever wandered the aisles of Home Depot looking for that tape you use to fix the pipe you just punctured while installing a new faucet?)
Given the bias of business owners to "do it themselves," some may wonder what the point I am getting at really is. One project that may not be a DIY is finding a commercial loan. Commercial loan brokers can help business owners find the best loans to meet the needs of their businesses. Here are a few reasons you may want to consider working with one:
- You've been turned down by one of the big national banks. Guess what? You're not alone. While there is some evidence that small business lending by the big banks is picking up, loan brokers speak with clients everyday who have been recently turned down for a loan from one of them. The good news is that there are many smaller community banks and non-bank lenders who are eager to earn your business. Commercial loan brokers spend a fair amount of time developing relationships with real people at hundreds of these lenders and are happy to get you a relationship with the right one.
- You don't know the difference between a 7(a) Loan a CAP Line and a Factoring Agreement. There are many different financing options in the market. Most lenders only understand (and promote) the products that they offer. A good loan broker will listen to your needs, ask the right questions and explain, in as much detail as you can stomach, the differences in eligibility requirements, pros and cons and pricing of each business loan available. Many routinely provide several scenarios to clients. This allows them to fully understand the financial impact of each loan option before making a decision. Loan brokers are able to find a borrower loan options that help them save a significant percent of the cost they would have spent had they found the loan on their own. Could you find the deal yourself? Sure, but it's not guaranteed and you could end up taking the more expensive loan, because it was convenient and you've invested as much time as you could afford in exploring options.
- You're not sure what information you will need in order to get a loan. As loan brokers, they know what documents and pieces of information you will need in order to apply for each type of loan. They won't let you waste your time pulling together documents you don't need and will help you focus your valuable time on gathering those you do. They'll also help you put all of this information together and present it to lenders.
As you probably expect, loan brokers also need to get paid for their services. After all, they have bills to pay and kids to put through college, just like you. My advice is to work with a loan broker who gets paid on a success basis. That is, the broker gets paid when you get the funding you need. Typically, these types of brokers get paid a percentage of the amount of the loan. In some cases the fee is paid by the lender and in some cases, it is paid by the borrower. Make sure you clearly understand how the broker will get paid before you start working together.
For those of you who choose to do it yourself, I wish you nothing but the best. However, there are a number of benefits available to business owners who choose to work with a loan broker.
(Image: David Castillo Dominici via freedigitalphotos.net)