How to Start a Commercial Loan Brokerage Company

Most companies, contractors and individuals require loans for various reasons. They need loans to execute projects, expansion or purchase equipment. A banks primary function is to disburse loans as a social responsibility and to generate income. However securing the loan is a serious challenge for many reasons. Brokerage firms are middlemen between lenders and borrowers. They provide leads according to the borrowers needs. Startup capital is low and you need training, interpersonal skills, good work ethics and networking.
Loans are fixed sums borrowed to a customer that is repaid in equal with interest. There are two categories of loans secured and unsecured loans.
The repayment is done on monthly installation at a fixed amount agreed by both parties. Once repayment is followed to the letter and fully paid the loan conditions is fulfilled.
The borrower pays a fixed amount and failure would cause a deduction of interest from the account or penalties. The borrower needs to meet the loan conditions and has the right to cancel or repay the loan early.
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Things to Consider before Securing a Loan
The terms and conditions to acquiring a loan cover the amount of credit and total amount payable. A loan could be serviced individually or jointly.
You have the right to withdraw and to request a statement of account at any time. You also have the right to repay early such as partial early repayment or full early settlement.
There are interests for late payment and loan is serviced through an account opened under the loan provider. The financial institution usually deducts the money from the account monthly and does credit checks.
This is usually carried out before the loan disbursement. It is advisable to run the full tenor of the loan to gain the full benefits of the loan.
  • Understand the terms and conditions
  • Amount of credit
  • Total amount payable
  • Right to withdraw
  • Request  a statement of account
  • interest for late payment
  • servicing the loan
Why companies use Loan Brokers
Many companies find it difficult getting loans for their projects. This is mainly due to certain conditions attached to loan approval and servicing.
To get a loan the financial institution providing the loan would conduct a credit check. They also require collateral, guarantors and other conditions.
Meeting theses conditions could be challenging and many companies are not appropriated loan facilities. This is where a commercial loan brokerage company comes into the picture.
Commercial loan Brokerage Company
A commercial loan brokerage company arranges loans and funding for companies. Brokers are the intermediaries between loan provider and businesses.
They find lenders through their network or through active searches. They receive a small percentage of the amount as payment for their services. Loan brokerage companies are private establishment and earn significant amounts from brokerage deals.
Learn the Trade
You need to have a deep understanding of loans and financial instruments. Other knowledge involves proper bookkeeping, accounting and banking knowledge.
You should decipher your client’s financial needs and the company’s financial health. You can learn the trade by attending a finance institution, seminars, or workshops.
Increase your knowledge through books, tutorials, online courses. You could try an apprentice program, work in a brokerage firm or find a mentor. 
Another way is to work in a financial institution that facilitates loans. Join a commercial loan brokerage firm or banking institution.
Broker Services
Brokers represent clients based on their investment needs. They act as strategic advisers and consultants to provide market knowledge to achieve the client’s objective. They work closely with financial institutions and take advantage of referral deals with partner organizations.
Commercial Brokerage Service
  • Strategic advisers
  • Middlemen
  • Consultancy services
  • Provide market knowledge
  • Supply leads
  • Take advantage of referral deals
  • Partner organizations.
How to Get a Business Loan
Financial institutions look for specific documents before accepting a loan request. Common criteria are credit score, debit income ratio and established companies.
Lenders prefer businesses older than two years in operation. They also estimate industrial risks and examine cash flow and margins.
They evaluate the business plan and reason for loan application. The borrower needs to draft a letter of intent explaining the purpose for the loan.
Documentation needed to process a loan is the company’s financial information, balance sheet, lease, article of incorporation and tax identification number.
The company seeking the loan also needs to provide collateral. They should include savings account history, equity and business plan.
  • Credit score
  • Debit income ratio
  • The Prefer old established company’s
  • Estimate industrial risks
  • Examine cash flow and margins
  • They evaluate the reason for application
  • Study the company’s financial information
  • Balance sheet
  • Lease
  • Article of incorporation
  • Tax identification number
  • Savings account history
  • Equity and business plan.
How to Use a Broker’s Service
To get started the company seeking loans need to approach a brokerage firm and fill the broker form. They need to conform to broker’s agreement before accessing their services.
The brokerage company assesses the company’s needs and sends leads to the company. They broker provides weekly updates on status of deals.
Choose a Niche
There are different markets in which a loan broker can operate. We have the mortgage brokers who facilitate mortgage loans and loan Note brokers.
Mortgage Lenders
There are different types of mortgage lends that provide financing or home loans. Common types are wholesale lenders, correspondent lenders and retail lenders.
Others include mortgage brokers, hard money lenders, direct lenders and portfolio lenders.  Commercial brokers work closely with many mortgage lenders to achieve the best rate and terms.
The lenders sometimes discounts the loans facilitated through partner brokers.
Commercial Loan Broker Compensation
A commercial broker should associate with a credit partner. Find a commercial credit firm that supports partnership that offers flexibility and good commissions.
They should offer fast transactions, good commissions and close deals. Some commercial loan brokers offer 12% commission for life of the loan transaction.
They pay $100 referral fee paid monthly on qualified leads. Others offer incentives, bonuses and direct payments monthly on all commissions.
If you run a commercial brokerage company you need structure your commissions. Commissions are only possible when a lender accepts a loan proposal.
The percentage value of the commission could be between 1-10 percent. The broker also earns through application fees ranging from $1000-$2000.
The commission is paid either from the lenders side or borrower. You need to clearly state in you contractual agreement the terms and conditions.
Some states do not require a license to operate as a loan broker. However you need proper networking and knowledge of the industry.
You could join an association and do some examinations. Find out from your local authorities about any licensing or certification.
If you run Brokerage Company incorporate the business as a limited liability company. You also need to have a tax identification number.
Draft an Agreement
To operate a brokerage firm you need to draft an agreement. The agreement is a binding contract between the borrower and your company.
The agreement should have terms of service and commission structure. You could hire an attorney to draft a comprehensive agreement.
How to start a Commercial Brokerage Company
  • Learn the trade
  • Incorporate the business
  • Build your network
  • Draft an agreement
  • Ensure proper documentation
  • Obtain licenses and permits
  • Market your services


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