Have you considered a business loan for you company? If so, you know the Lending World is a very complicated place for small business borrowers who could use some help navigating through the commercial loan process. Here at ComCap Financial Group (broker), we are here to help you. We help small to medium-sized companies through the maze of comparison-loan shopping, paperwork, lending requirements, conditions, and fees so they get the best loan that suits their needs. Head spinning yet? Let’s start off simple and look at some questions you should ask a commercial loan broker. I have also provided our answer for you. Do not fret; I am here to help every step of the way.
1. Why should I use a Commercial Loan Broker?
There are many good reasons why you should use a broker:
- They develop a relationship to the business owners to understand their business or another way to say it, “Understand the business of the business”.
- They specialize in matching my lenders’ loan products to borrowing needs.
- By working with the broker from inception of the loan request, we’re able to negotiate the best terms and conditions because of our close relationships that we have with lenders.
- Most of the time, I receive a loan request from a borrower when their local financial institutions turned them down. Now, the borrower has to start all over again. So, when we get a loan package from the borrower, we match at least four available lenders who like those types of the loan requests.
- We are able to negotiate the deal with lenders for terms, and conditions due to our close working relationships that have been well established.
- We keep very close watch on the request, via conference call to the lenders and borrower.
- In addition, due to our relationships, we can get the underwriter to discuss the deal before the actual submission to bring up any surface problems that most likely would have caused the loan to be denied.
- Lastly, and most importantly, your broker will always know where your deal stands.
2. How do you get paid?
The most common way a broker can get paid will be by the lender or a fee finder agreement. These respectable brokers typically earn a modest fee of 1% to 3% of the total amount of the borrower’s loan. The lender can charge the one-time fee or incorporated into the interest rate.
3. What costs will I incur with borrowing from your lenders?
There are no federal or state rules about how much lender can charge the borrower for a loan. If the broker discovers that the borrower will qualify for loan with a community banks or credit unions, particularly for SBA loans seem to charge the lowest fees. The amount of this fee will depend how much risk the lenders will take to make this loan.
At the beginning of your conversation with the broker, get an estimation of how much this loan will cost your company. Remember, that brokers currently aren’t obligated to disclose their fees. For example, our fees at ComCap are discussed in the beginning of our initial conversation to make sure our borrower is comfortable in moving forward toward an application.
4. How many different lenders will you give my business information to?
Currently, ComCap has twenty-five different lenders in their portfolio, so that multiple lenders are forced to compete for your business. For example, at ComCap we always recommend that borrowers apply for at least three lenders when seeking a loan. Beware, if your broker does not take the time to understand your business and tells you, they don’t recommend shopping your loan around because they deal with only one type of loan product.
5. Are you required to have a license?
In most states, nearly anyone can start a business as a loan broker. There are no licenses required or code of ethics to follow. So, I do recommend for the borrower to ask questions on how long have they been in this type of business. For example, at ComCap we have been commercial lending business in the area of small to medium-sized companies for past 32 years.
The broker should disclose what the borrowers should expect and indeed understand the type of product is right for the company.
6. Should I apply for a SBA loan at my bank?
A common question that is asked from small-business owners is whether they should go to their bank. Banks want you to come to them first, so they can sell you other products of the bank. I know this for fact, because I was a commercial banker for 20 years. If you decide to go to your local credit union first, and they turn you down, what do you do know? However, with a broker, you only need to provide your applicant once, and they make sure all the required SBA documents are complete and accurate. For example, ComCap is an SBA specialist for 3- 4 different banks and credit unions to have the best rate, terms and conditions that are available.
7. What types of relationships do the broker have with commercial lenders?
When you are considering a broker, ask them, if they have favorite lending institutions for your type of loan and why. The broker will give their opinion that is the best lender to use for your financing; however, it is up to you to try to figure out the reason they are recommending those lenders. Here are some of the things you need to compare, terms, rates, conditions, collateral, and fees
The broker relationship with the lenders revolves around their direct access to the underwriters.
8. How much are the lenders willing to finance?
It depends on rates, fees, loan-to-value, collateral, cash flow, how long in business, and down payment and your story on the business. Using a broker, they can shop your loan request to multiple lenders, you can choose one that gives you the better options.