Takeaways
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Finance broker business loans make more sense for many business owners, because your broker works for you to secure the most favourable business loan terms on the market.
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They can help with a wide variety of business finance, including term business loans, commercial property, equipment and asset purchase, lines of credit and more. A commercial finance broker plays a crucial role in navigating these options, ensuring you get the best possible deal tailored to your needs.
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The primary benefits of using a business finance broker are potential access to better loan terms, significant time saving and ensuring your loan and business objectives are well aligned.
What is a business loan broker?
A business finance broker is an accredited agent that is there to help you navigate the world of business-related lending, including the broader marketplace of commercial finance options.
Finance broker business loans are sourced from a wide marketplace of potential lenders – from the big banks to smaller niche lenders. Your finance broker’s job is to understand your situation, needs and objectives in depth, so they can negotiate on your behalf with business lenders and show you the best fit options that are available.
“Having a business broker working for you means you can avoid rushing in and getting the wrong-fit financial product, which may affect your cash flow and financial position over time” says Nadine Connell, accredited finance broker and Co-Founder of Smart Business Plans.
What types of business loans can a broker help with?
There are many different types of business loans – experienced business finance brokers help you understand the pros and cons of different options, based on your unique needs. Some common types of business lending include:
Term business loans
Term loans are one of the most common types of business finance. A business fixed rate loan is particularly beneficial for funding larger, one-off expenses like new equipment, real estate, or working capital, offering the certainty of fixed monthly payments for businesses that know exactly how much they need to borrow. They involve borrowing a lump sum of money from a lender and repaying it over a fixed period, typically with regular installments of principal and interest.
Term loans are used for various purposes such as business expansion, equipment purchase, working capital, or refinancing existing debt.
Line of credit
A line of credit provides businesses with access to a revolving credit facility, allowing them to borrow funds up to a predetermined credit limit. Businesses can draw funds as needed and only pay interest on the amount borrowed. A line of credit can be suitable for covering short term expenses, or taking rapid advantage of an unexpected opportunity for growth.
Additionally, a business overdraft is a form of line of credit loan that offers companies the flexibility to continue withdrawing money even when the account has no funds, providing crucial cash flow stability and short-term financial flexibility.
Equipment financing
Equipment financing allows businesses to purchase or lease equipment and machinery needed for operations. The equipment serves as collateral for the loan, reducing the lender’s risk. Equipment loans typically have fixed repayment terms and may offer tax benefits through depreciation deductions.
Invoice financing
Invoice financing, also known as accounts receivable financing, involves borrowing money against outstanding invoices.
Businesses can access immediate cash flow by selling their unpaid invoices to a lender at a discount. Invoice financing helps businesses maintain steady cash flow and cover expenses while waiting for customer payments.
Commercial real estate loans
Commercial real estate loans are used to finance the purchase, construction, or renovation of commercial properties such as office buildings, retail centers, and industrial warehouses.
These loans may be secured by the property itself and offer competitive interest rates and long repayment terms.
Cash advances
Cash advances are upfront payments in cash in exchange for a percentage of sales in the future. Repayments can be made with a fixed percentage of the business’s daily sales, making it suitable for businesses with revenue streams that change.
However, cash advances typically come with higher fees and interest rates compared to traditional loans.
Business acquisition loans
Business acquisition loans are used to finance the purchase of an existing business or franchise. These loans may cover acquisition costs, working capital needs, or other expenses associated with the acquisition.
Business acquisition loans may be structured as term loans, lines of credit, etc, depending on the borrower’s needs and qualifications (this article might help if you need a loan of $1 million or more): “How to get a $1 million dollar business loan (Australia)”
Start up loans
Startup loans provide financing to new businesses or entrepreneurs looking to launch a new venture. These loans may be used for business planning, product development, marketing, or initial operating expenses.
Startup loans may require personal guarantees or collateral and may come with higher interest rates due to the higher risk associated with startups.
Business expansion loans
Business expansion loans are used to finance growth initiatives and expansion projects for established businesses. These loans may be used for purposes such as opening new locations, hiring additional staff, launching new products or services, or expanding operations.
Business expansion loans may be structured as term loans or lines of credit – it just depends on the specific situation.
Benefits of finance broker business loans:
Working with a business loan broker can provide a number of benefits:
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Save a lot time. Particularly if you work with a full-service business broker who can also help you with your business plan and cash flow forecasting. A mortgage broker or mortgage brokers play a crucial role in this process, assisting businesses in finding the best business loan deals by comparing multiple options and providing access to a tailored agreement from a panel of lenders.
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Get better rates. Business finance brokers leverage their experience and relationships to potentially get you better rates and terms than you could get yourself.
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Navigate complexity. The secured or unsecured business loan process and be complex. A commercial broker can help streamline the process and improve your success potential. They are particularly adept at navigating the intricacies of a secured business loan, which involves pledging personal assets for lower interest rates, as well as unsecured loan options.
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No effective on credit score. Apply for secured or unsecured business loans has the potential to impact your credit score if not handled correctly. Your broker will help you avoid this.
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Avoid getting the wrong loan. Not spending time upfront to review your business loan options can have a significant impact on your financial position. Finance brokers help you avoid these mistakes.
“The key advantage my clients tend to share with me is that it feels great to have someone on their side, working for them to ensure they get the best outcome, rather than a bank just trying to push their particular business lending product, even if it isn’t the best fit”,
Nadine Connell, Smart Business Plans Australia.
“Many clients don’t see the level of market research that goes on in the background, the negotiating with various lenders, the financial modelling and bank loan business plan. The business loan process is more complex without an experienced partner by your side.
Is it easier to get a business loan through a broker?
“The advantage of using a business loan broker is that they whole process is typically easier. That’s because your business loan broker does a lot of the heavy lifting for you. And if you’re using a premium finance broker, that will include cash flow forecasting and preparing your business plans if required. In many cases you’ll also be able to secure better terms, so it makes a lot of sense,” says Nadine Connell, Founder of Smart Business Plans and accredited commercial loan broker.
Brokers play a crucial role in facilitating a business finance solution, helping clients like Matt and John secure the necessary funding for their ventures through comprehensive financial strategies, including business overdrafts and cash flow lending.
What can I expect during my first meeting?
In your first meeting, your business loan broker will get to know you and your goals in detail. This will likely include a review of your existing financial situation, business plan and objectives (or develop this for you if you don’t have one and it’s needed as part of the application process), and all other important factors that will go into the loan process.
That’s why the more a brokerage knows your business goals, the greater your potential for success.
“I really struggle with the ‘get a fast loan market’. I realise that some people are stuck in a really hard place and need cash fast, but if they would connect with me just a little bit earlier we could work together to find any better options on the market that could mean much better terms”
Nadine Connell, Smart Business Plans.
What about new business loans?
First-time business owners can face a harder time getting a business loan. It’s often the case that lenders will look for at least 6 months trading history amongst other things, which mean new business owners struggle to get started.
A business finance broker is a great way to see if there are work arounds if this is a situation you face. Often their relationships with niche lenders mean we can find ways to get your business off the ground (albeit on less favourable terms), with the aim of refinancing to better terms once 6 months of trading has been achieved. There are often creative ways to solve financial problems business owner face, one of the many advantages of working with a business loan broker.
Additionally, securing an unsecured loan can be particularly challenging for new businesses without collateral, as these loans carry greater risk for lenders and often come with higher interest rates.
How do I get started with finance broker business loans?
While many people assume all banks are the same when it comes to business lending, but in fact each lender uses slightly different criteria to determine eligibility to apply for business loans based on their own appetite for risk, and the market share they are seeking to capture in particular markets. Generally speaking however, lender considers six main characteristics for the determination of eligibility for a business loan.
The team at Smart Business Plans would be happy to walk you through these factors and explore if we are a good fit for what you are trying to achieve.
