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What Is A Finance Broker?

What Is A Finance Broker?

What is a finance broker? A finance broker should not be confused with a bank loan officer. Yes, they both help businesses secure financing yet a finance broker is usually removed from a large banking firm, even if they do work with business contracts.

Their roles may be similar but a finance broker typically needs a smaller setup which may simply include a home office and they then travel to meet prospective clients instead of having them make the journey.

If a business requires additional funding then they may steer clear of a bank loan in favor of using a finance broker to find an appropriate loan. In this guide, we will look at what a finance broker is, their responsibilities, and how they operate to secure funding for a business.

What Is A Finance Broker?

Any business owners looking to secure funding should get to know a finance broker during that process. The finance broker is the intermediary that acts with business owners before they receive the funding they desire. While you may expect a finance broker to be a single individual, it could be a firm of people too that all do similar jobs.

Finance brokers can process financial transactions as well as be an advisor for additional funding or investment plans. The main responsibility of a finance broker is to form an agreement between the lenders and business owners/entrepreneurs to work out which lending products to use.

Of course, this work does not come for free and, for their endeavors, a percentage will be taken of that total funding in the form of a commission which should be written into any agreement.

A finance broker may also benefit from a residual income, or recurring fees, that are made explicit from the agreement too. Those fees can soon add up and a finance broker can make up a comparative amount of money as a typical business owner would.

The Responsibilities Of A Finance Broker

As well as helping to arrange funding for business owners, a finance broker will also perform a few more tasks. That could include such tasks as helping a business owner open lines of credit, buy property, and lease the equipment they may need for their business.

Other business tasks could include collecting incoming payments from customers, refinancing loans, leasing various pieces of equipment, and debt consolidation. For a growing business, a finance broker may even help to open various franchises.

A finance broker is typically used for these tasks and responsibilities as they have specific knowledge of how finance can be sought. This can help a business function via alternative financing products, specifically those aside from using a bank.

The finance broker may prove to be a welcome choice as they can take a more detailed look at a business to show the right solutions.

How A Finance Broker Operates?

In order to find the most appropriate funding for a specific business, a finance broker begins by evaluating the business needs. Once these needs are established, the finance broker will compare the available options. That evaluation may take time as the finance broker will work out how much funding you can borrow and offer advice on how to manage it.

If the funding arrangement does make financial sense to all parties then pre-approval takes place. As well as finding the right funding, the finance broker would also help when the loan application is ready to be submitted.

A lot of business owners will not know how to fill in a loan application so the finance broker should help to fill in the forms and submit it properly. If the funding is appropriate and the paperwork is completed properly then the funds should come in. You can expect the finance broker to take a chunk out of the funding which is essentially their payment for securing it.

This fee is in the form of commission, usually from the lender due to the products being used that have been recommended by the finance broker. This commission is typically marginal so should not represent a concern. Certainly not to question the financial advice that a business owner has been given.

Final Thoughts

Finding the right finance broker for a certain business may mean asking friends, family, and other business owners for their recommendations. Referrals can be a good way to find relevant candidates yet you can check if they are professionally accredited too.

Whether they are specifically trained or not, the finance broker will run through the options to find the right one for the business and its individual circumstances.

Frequently Asked Questions

How Much Training Does A Finance Broker Require?

A business owner may approach a bank for additional financing, simply because they trust the institution. That could be because a finance broker may not require any special training. That may be a worry yet their job could simply mean that they act as a referral agent as they know a lending product that would work.

This is where a finance broker’s knowledge comes in as their specific know-how could make the difference. Should a finance broker ask to see financial statements, this is typically to judge whether the business owner is fit for financing.

That investigation does not have to take very long and may not even come from any specific training behind it. It could well be that this underwriting is to give the finance broker some justification behind the additional funding, and whether they could earn significant residual income from it.

Is A Finance Broker Known To Be A Difficult Job?

While being a finance broker may seem like a relatively easy job for swift financial reward, it can be a difficult job. Many finance brokers have to work hard before they can generate some significant business.

That could be working out particular types of clients, a range of financial products to suit different types of businesses, and drumming up a range of clients through promotion. The job itself requires an understanding of financial products and comes with a lot of customer service.