Building Your Commercial Finance Broker Business

Kristine Darroch

Last Modified : Oct 23, 2024

Fact-checked by: Bruce Sayer

We live in a transformative age – what was once established and normal is now influx and unpredictable. This is most evident in business financing, which has undergone significant changes due to tightened lending criteria. Regulatory changes and a focus on risk management have prompted traditional lenders to adopt more conservative approaches in evaluating borrowers. As businesses seek the stability of reliable business financing, commercial finance brokers are well-positioned to grow their portfolios by facilitating alternative financing solutions.

The Economic Outlook

After a slowdown in the first quarter of 2024, GDP growth rebounded to 3.0% in the second quarter. Policymakers appear to have controlled inflation without triggering a recession. Forecasters are optimistic, projecting 2.7% growth for the year, driven by factory construction and expected interest rate cuts that will further stimulate consumer spending.

However, we now live in a world of uncertainty. Two alternate scenarios are possible – an upside scenario with positive labor market changes and productivity gains, and a downside scenario that considers the risks of geopolitical conflict and trade policy impacting inflation. In either scenario, businesses need stable financial structures to meet operational expenses and flexible financing arrangements to react quickly to changing market conditions. This is fertile ground for commercial finance brokers to grow their portfolios.

While it’s great that businesses have survived four years of extreme volatility, they now need to reinvest in staffing, training, inventory, and innovation to uplift products, improve services and rebuild productivity. The demand for commercial finance brokers to source funding to meet these investment needs will only grow over the coming years.

Opportunity for Growth

A recent survey reveals that nearly 1 in 4 businesses lack enough capital to operate for a year. Almost 60% said that increasingly longer payment terms with customers require them to find alternative sources of working capital to fund their growth goals. This is an opportunity for commercial finance brokers to grow their portfolios.

Build Relationships and Avoid Bad Habits

To thrive in this fertile environment, commercial finance brokers must provide viable cash flow solutions and reliable access to working capital to their clients. The ability to deliver these solutions depends on each commercial finance broker’s ability to source alternative lenders with the financial means and industry experience to support the deal.

It pays to establish a working relationship with lenders and understand their capabilities and limitations before brokering deals to support clients. Failure to do this relationship-building upfront will severely limit a commercial finance broker’s ability to react quickly and efficiently to new opportunities, forcing bad habits to take the place of proficiency.

Following are the bad habits commercial finance brokers can fall into and should make every effort to avoid:

1. Chasing the “Big Whale” deals only: It’s tempting for a commercial finance broker to be seduced by the commission potential of transactions in the tens of millions and lose sight of the importance of smaller bread-and-butter deals. Generally, the larger a deal gets the more complicated the financial structure becomes – careful due diligence is mandatory. Unrealistic business goals and the potential for fraud increase as the size of the deal grows, necessitating the need for increased due diligence. These larger deals take extended time to conclude the transaction and, therefore, eat up a lot of manpower and energy in the process. Smaller bread-and-butter deals are needed to maintain a regular revenue stream. Be sure to work with alternative lenders experienced in the industry the deal is to serve and have the financial bandwidth to accept both smaller deals and the big whale deals we all like to chase.
2. Not understanding a lender’s core competency: A common pitfall that commercial finance brokers fall into is trying to promote a lender’s product and services without fully understanding how that lender is suited to solve your client’s industry problems. Find a lender with the financial depth and industry experience to understand and solve the financial barriers that hinder your client’s business. As the broker, you need to be able to highlight the benefits of the lender’s products and services rather than just the features.
3. Forcing a square peg into a round hole: A commercial finance broker often attempts to push a deal through with little regard for the lender’s underwriting criteria. This is the wrong approach as it will create a sense of incompetency from the lender’s point of view and undermine your relationship with them.

Who is eCapital?

eCapital is a specialty lender servicing thousands of customers across the US and Canada, with working capital facilities for businesses in about 80 industries. In pretty much all cases, we are the senior lender providing the entire capital that they need to support their existing operations and growth plans.

Our vision is to lead the way as an innovative capital solutions provider for small and medium-sized businesses. Our reach is across North America with current expansion taking place to secure our brand in European markets. Our development plans are based on organic growth, acquisitions, and the expansion of our network of commercial finance brokers.

How Can eCapital Help Your Commercial Finance Broker Business Grow?

eCapital is dedicated to supporting a robust commercial finance broker program to help our broker partners meet their clients’ funding needs with tailored financial solutions. Work with eCapital, a partner you can rely on to earn big, strengthen relationships and help you grow your business:

• Competitive Commission: Get paid for every deal we fund, with no limit on what you can earn.
• Education and Training: Learn the features and benefits of our industry leadings products and services to meet your clients’ financial needs. Use our training materials, resources, and sales collateral to grow your business.
• Professional Experience: Our team represents decades of combined experience in many industries, with core experience in manufacturing, staffing, warehousing, transportation, and much more. Leverage our expertise to strengthen client relationships, gain trust and become recognized as a financial specialist in your clients’ industries.
• Flexible Terms and Credit Limits: eCapital provides tailored solutions with flexible terms to best leverage the strength of your client’s business assets. As the valuation of these assets grows, eCapital increases credit limits to gain even more access to working capital. In other words, the more your client’s business grows, so does their funding facility.

eCapital’s relationship with our broker partners is at the core of our business – building your business with integrity, transparency and mutual trust is fundamental to our success. Our simple approach to financing means minimal paperwork and fast turnaround time. Use our quick and easy online application to submit referrals.

The Broker Referral Process

We are here to help grow your business. It starts with a simple referral process:

1. Register: Get in touch to request our commercial finance broker’s agreement
2. Submit Referrals: Use the online application form or give us a call.
3. Get Updates: Receive weekly updates on the status of your referral.
4. Start Earning: Get paid for every deal we fund, with unlimited earning potential.

The services provided by eCapital include:

• Accounts receivable financing
• Inventory financing, and supply chain financing
• Equipment refinancing
• Asset-based lending

You can count on our support every step of the way. At eCapital, our focus is on creating financial solutions that optimize how your clients’ businesses leverage the assets they have at their disposal. Tap into our financial resources, varied industry experience and support services to build your commercial finance broker business with the right tools to ensure your success.

Conclusion

Traditional lenders are adopting conservative approaches, making it essential for businesses to seek reliable alternative financing solutions. As companies aim to stabilize and reinvest in their growth, the demand for commercial finance brokers is expected to rise, especially as many businesses struggle with inadequate capital.

The economic outlook is cautiously optimistic, with GDP growth rebounding and projections of a 2.7% increase for the year, but potential geopolitical risks remain. As portfolio growth opportunities arise, commercial finance brokers must avoid common pitfalls, such as chasing only large deals, misunderstanding lender capabilities, and misaligning deals with lender criteria.

eCapital positions itself as a supportive alternative lender, offering flexible funding solutions to businesses across various industries. They emphasize the importance of strong partnerships with brokers, providing competitive commissions, training, and access to tailored financial products. The broker referral process is streamlined for efficiency, allowing brokers to earn unlimited commissions while delivering essential funding solutions to their clients.

Contact us today for more information on how eCapital can help your commercial finance broker business grow.

Key Takeaways

• Nearly 1 in 4 businesses lack enough capital to operate for a year. 60% must find alternative sources of working capital to fund their growth goals.
• The demand for commercial finance brokers to source funding to meet growth investment needs will only grow over the coming years.
• It pays to establish a working relationship with lenders and get to understand their capabilities and limitations before brokering deals to support clients.
• Strong partnerships with specialty lenders provide commercial finance brokers with competitive commissions, training, and access to tailored financial products.

Kristine Darroch

With over 15 years of experience spanning strategic marketing, business management, and commercial finance, Kristine has established herself as a trusted advisor for small to mid-market businesses seeking sustainable growth. Her unique blend of entrepreneurial experience and industry expertise sets her apart.

Having founded and led a successful small business herself, Kristine understands the challenges and opportunities entrepreneurs face. This firsthand knowledge, coupled with her proven track record in diverse industries, fuels her passion for empowering businesses to succeed. 

Since joining eCapital, Kristine has become a leading expert in commercial finance. She specializes in crafting tailored accounts receivable financing solutions that provide businesses with the flexibility and scalability they need to thrive. By building strong partnerships based on trust and understanding, Kristine delivers innovative financial structures that align with her clients' goals.