How to Choose a Loan Broker
Looking for a small business loan can be a laborious and stressful process, and even the most independent small business owners might wish for a bit of extra guidance. Enter the loan broker.
What to Look for When Choosing a Loan Broker
The benefit of a loan broker is their ability to connect the borrower with a number of lenders that best meets their needs. When searching for local loan brokers please note, that their company name may include phrases like “lending solutions” or “lending group.” Every office will have a different operating strategy, and will may even help you to find financing source outside of your local area.
But before you entrust your broker with such an important part of your business, it is appropriate for you to ask some questions.
What Are Their Experience and Credentials?
Loan brokers are only lightly regulated, so brokers will have different qualifications and business models. A broker may have little or no formal training, or may have taken an online course to become a loan broker. The majority of states do not license loan brokers, and the ones that do license them have lenient requirements. In California, for example, any licensed real estate broker can act as a mortgage broker as well. Out-of-state brokers have to be bonded and pay a licensing fee to operate in the state.
What Are Their Conditions and Payment Models?
Some loan brokers will only charge you if you sign a loan agreement with a lender they found you. Others will charge you whether or not they succeed in finding you workable financing. In either case, ask them in advance about the range of conditions they make available to you. You may want to know how many lenders they contact and whether or not they charge the lending institution for their services as well. Keep in mind that, if they are receiving money from the lender, they are not working exclusively for you.
Are They Favorable To Conventional Lenders?
There are websites that operate similarly to loan brokers. They too have a variety of business models. Online lending marketplaces will help connect you to online lenders, whose lending conditions are likely to be less favorable than conventional lenders (banks and credit unions). The can be much faster than conventional lenders, however. Both loan brokers and online lending marketplaces can help you at a crucial time in your business life if you approach them with due diligence.
Conventional Lenders Prefer 504 Loans
The 504 loan provides you with accessible financing for 35-40% of your total project cost at a fixed, below-market rate. It makes you an attractive candidate for a conventional loan because your conventional lender receives first lien position while providing only half the total cost. You pay a low down payment of 10-15% of the project cost. The 504 loan has terms of 10, 20 or 25 years, and is fully amortized (so there are no balloon payments).
A 504 loan can be used to obtain fixed assets, such as
- financing commercial land or buildings
- constructing buildings
- purchasing large equipment
- upgrading buildings
- refinancing commercial real estate mortgages
Prequalifying for a 504 loan gives you an understanding of how much financing you can get
through the SBA and what your down payment will be. It takes only a few documents and usually less than 48 hours. Prequalifying gives you an “in” with conventional lenders and your CDC, such as TMC Financing, can help you find the right conventional lender for your project as well, if you wish.
When you deal with a CDC, you know you are getting highly qualified advice on financing that is designed to help you succeed. Starting your search for financing by prequalifying for the 504 loan sets you on a course for financing that is right for you.
You can find out more about securing a 504 loan from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender, and has funded projects worth more than $9 billion across California and Nevada, resulting in the creation of an estimated 60,000 jobs. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.
Latest posts by Kurt Chambliss (see all)
- How to Choose a Loan Broker - September 25, 2018
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- Introducing the New 25-Year 504 Loan Term: What It Means for Borrowers - August 23, 2018