The financing industry is evolving rapidly. From traditional loans and mortgages to specialty products like factoring, asset-based lending (ABL), and supply chain finance, demand for flexible capital solutions is at an all-time high.
As opportunities grow, more professionals are stepping into the role of broker — connecting businesses with lenders and helping them access the funding they need. But one important question remains:
Do you need a license to sell or broker financing products?
The answer depends on the type of financing, the client base (consumer vs. business), and the jurisdiction.
First of All, What Is Brokering?
At its core, brokering means acting as an intermediary between a client and a lender. If you:
- Collect borrower or business information,
- Present financing options,
- Negotiate rates or terms, or
- Facilitate introductions with lenders…
…then you’re performing brokering activity, which may require licensing depending on the product and region.
Example:
Sharing a simple referral link through an affiliate program is not considered brokering — it’s passive marketing. But if you take the next step and begin arranging terms, discussing rates, or introducing a client directly to a lender, that activity is considered brokering, and licensing requirements may apply.
Different Roles in Financing Partnerships
There are several ways professionals participate in financing arrangements:
- Referral Partner (Introducer / Finder) – Passes along a potential client’s details to a lender. Does not negotiate or handle applications. Usually paid a flat referral fee. Often exempt from licensing in commercial finance.
- Broker (Intermediary / Arranger) – Collects information, discusses options, negotiates terms, and arranges financing. Almost always requires licensing in consumer finance; sometimes in commercial finance.
- Affiliate (Link-Based Marketing) – Uses referral or affiliate links to drive traffic. Passive, with no direct involvement in financing terms. Regulated as marketing/advertising, not brokering.
- Agent / Representative of a Lender – Acts under a lender’s license or authorization (common in the UK/EU under FCA rules). No separate license required, but must comply with the lender’s compliance framework.
- Consultant / Advisor – Provides business or financial advice, which may include recommending financing. If advice strays into “arranging credit,” it may be considered regulated activity in some jurisdictions.
- Embedded Partner – Integrates financing directly into a platform, product, or service (e.g., a SaaS company offering embedded lending within its software). Typically requires regulatory oversight or a licensed partner.
- Brand Partner – Co-brands financing offerings under a joint marketing agreement (e.g., “Financing powered by eCapital”). Usually operates under the lender’s license, but marketing compliance rules apply.
- Strategic Alliance – A deeper collaboration where two or more businesses work together to jointly develop and distribute financing solutions. Often involves shared risk, joint branding, and long-term contracts.
Understanding these distinctions helps professionals choose the right role while staying compliant.
United States: Commercial vs. Consumer Financing
Consumer Financing (B2C)
If you’re brokering personal loans, mortgages, or auto finance:
- You almost always need a Mortgage Broker License or Consumer Lending License, issued at the state level.
- You must comply with federal consumer protection laws such as the Truth in Lending Act (TILA).
Commercial Financing (B2B)
If you’re arranging business loans, leases, or alternative finance:
- Regulation is lighter, but some states (California, Nevada, New York) require a Commercial Finance Broker License.
- Other states allow brokers to operate with only a business license, as long as client funds are not handled directly.
- New state laws (e.g., California SB-1235, New York’s disclosure law) require transparent disclosures, even if licensing isn’t mandated.
Canada: Provincial Regulation Leads the Way
- Consumer Financing: Mortgage brokering and consumer loans are highly regulated — requiring a Mortgage Broker License or provincial equivalent.
- Commercial Financing: Typically no license is needed to broker factoring, ABL, or commercial loans, except in Quebec where financial intermediaries must register.
UK & EU: FCA Oversight Matters
- Consumer Credit: If you broker personal loans, credit cards, or hire purchase, you must be authorized by the Financial Conduct Authority (FCA) as a Credit Broker.
- Commercial Finance: Most factoring, invoice finance, and ABL transactions fall outside consumer credit regulation, but many brokers still seek FCA registration for credibility and trust.
Specialty Finance: Factoring, ABL & Supply Chain Finance
Specialty finance products are often treated differently from traditional lending:
- Factoring (Invoice Finance): In most U.S. states and Canadian provinces, factoring brokers do not require a license. However, states like California and New York require broker registration and disclosures. In the UK, invoice finance is usually unregulated unless tied to consumer debt.
- Asset-Based Lending (ABL): Because ABL is a form of commercial financing, licensing generally isn’t required in most U.S. states or Canadian provinces. Some U.S. states may require a commercial finance broker license if you actively arrange and negotiate terms.
- Supply Chain Finance (Trade Credit, Reverse Factoring): Typically unregulated from a licensing perspective in North America and Europe, since it is a B2B commercial transaction. Disclosure laws may still apply.
Key point: Specialty finance brokers face fewer licensing hurdles than consumer finance brokers, but must still follow disclosure and fair practice rules.
Quick Reference: Licensing Requirements by Region
| Region | Consumer Financing (Loans, Mortgages, Auto) | Commercial Financing (Loans, Leasing, ABL, Factoring) | Specialty Finance (Factoring, ABL, Supply Chain) |
| U.S. | Mortgage/Consumer Lending License required in all states | Some states require Commercial Finance Broker License (e.g., CA, NY, NV); others don’t | Generally no license, but disclosure laws apply in CA & NY |
| Canada | Mortgage Broker License required (provincial regulators) | No license in most provinces; Quebec requires registration | Typically no license; Quebec requires registration |
| UK/EU | FCA authorization required as Credit Broker | Usually outside consumer credit regulation; FCA registration recommended for credibility | Usually unregulated; disclosure and FCA standards may apply if tied to consumer debt |
Why Licensing and Compliance Matter
Even if your jurisdiction doesn’t require a formal license, being compliant builds credibility with lenders, investors, and clients. Brokers who follow proper disclosure and ethical practices stand out in a crowded market.
Licensing and transparency aren’t just about avoiding penalties — they’re about demonstrating professionalism and trustworthiness.
The Bottom Line
- Consumer loans = license required almost everywhere
- Commercial finance = varies by state/province; disclosure rules increasing
- Specialty finance (factoring, ABL, supply chain) = fewer license requirements, but compliance and transparency still matter
Top 6 FAQs on Licensing for Financing Brokers
1. What is considered brokering?
Brokering generally means arranging, negotiating, or introducing financing between a lender and a client — whether that’s a business loan, factoring line, or mortgage. If you present terms, negotiate rates, or act as an intermediary beyond a simple referral, regulators typically consider that “brokering.”
2. Do I need a license to broker factoring deals?
Not in most U.S. states or Canadian provinces, but disclosure rules apply in states like California and New York.
3. Can I act as a referral partner without a license?
Yes, in many regions — if you simply refer leads and don’t negotiate terms or handle funds. But consumer finance referrals may still require licensing.
4. What happens if I broker financing without the right license?
You could face fines, legal action, reputational damage, and have deals voided if you operate outside regulatory requirements.
5. Do asset-based lending (ABL) brokers need licensing?
Generally no, since ABL is commercial. Some U.S. states require a commercial finance broker license if you’re actively arranging deals.
6. Why should I get licensed if it’s not required?
Licensing (or at least registration) signals professionalism, builds trust with lenders and clients, and may give you a competitive edge.
At eCapital, we work closely with affiliates, brokers and advisors across fintech and specialty finance. Whether you’re introducing clients to factoring, ABL, or supply chain financing, our team ensures you stay compliant while creating growth opportunities.
Contact us today to learn about our affiliate, broker and referral partnerships.
Disclaimer
The information provided in this blog is for general informational purposes only and should not be interpreted as legal, financial, or regulatory advice. Licensing requirements vary by jurisdiction, product type, and business activity, and are subject to change. Readers should consult with qualified legal counsel, regulatory authorities, or compliance professionals before acting on any information contained herein.
eCapital makes no representations or warranties regarding the completeness, accuracy, or applicability of this content to individual circumstances, and disclaims any liability arising from reliance on the information provided.
ABOUT eCapital
At eCapital, we accelerate business growth by delivering fast, flexible access to capital through cutting-edge technology and deep industry insight.
Across North America and the U.K., we’ve redefined how small and medium-sized businesses access funding—eliminating friction, speeding approvals, and empowering clients with access to the capital they need to move forward. With the capacity to fund facilities from $5 million to $250 million, we support a wide range of business needs at every stage.
With a powerful blend of innovation, scalability, and personalized service, we’re not just a funding provider, we’re a strategic partner built for what’s next.
