How to Choose High-Value Lenders to Help Build Your Commercial Loan Broker Business
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Fact-checked by: Bruce Sayer
As a commercial loan broker, it is essential to market and promote your business as the best source of financing options for business owners. Confidently projecting your ability to streamline flexible and affordable financing is the key to winning new opportunities. This is particularly challenging if you’re an unknown broker or a small firm trying to gain a foothold in the industry. However, allying your business with experienced lenders increases your legitimacy as a broker, expands your ability to win opportunities, and positions your business for growth.
Many new brokers start on the wrong foot by spending time and effort trying to secure new business before they’re ready to broker a deal. Instead, they chase business first, then use the shotgun approach to tender opportunities to a large pool of lenders. Feeling confident they hold all the cards by owning the opportunity, new brokers expect competing lenders to come forward with attractive offerings to manage the deal and deliver high commissions. In most cases, this approach is unsustainable and ultimately a recipe for failure.
The true path to success for commercial loan brokers is to build mutually beneficial relationships. The first and most important relationship is with lenders dedicated to helping your brokerage grow and be profitable. Your lenders’ experience, resources, and expertise become your competitive advantage to offer clients multiple financing options quickly.
This article discusses how to choose high-value lenders that will close deals and help build your commercial loan broker business.
Building Mutually Beneficial Relationships
For brokers, mutually beneficial relationships involve three parties – the lender, the broker, and the borrowing company. Establishing solid lender/broker relationships sets the stage for building a succession of broker/borrower relationships that will grow your business. Devote the initial phase of establishing your brokerage to sourcing a network of high-value lenders committed to building your business. Here’s a few guidelines to follow:
- Identify a niche market to focus your business growth on. Developing expertise in a specific industry narrows competition and brands your brokerage as a specialist.
- Identify high-value lenders experienced in your chosen field of expertise. Look for those able to close deals with fast, flexible solutions, offers high commissions, and have the knowledge and dedication to help grow your business profitably.
- Be prepared to offer a marketing plan to lenders. You want to profit from their lending solutions – they want to profit from your referrals.
- Contact, interview, and select lenders with the intension of formalizing a mutually beneficial relationship. The agreement should be short, clearly defined, and straightforward.
What to Look for in a High-Value Lender
A high-value lender can meet your clients’ financial needs, provides multiple ways to earn commissions, and manages your clients according to your want. The level of your participation in the lending arrangement should be your choice. Some brokers prefer to have an active role in the daily management of the account. However, most brokers want a hands-off relationship with reliable communication and on-demand reporting to monitor activity and commissions. A high-value lender will be able to manage the account according to your want, plus:
Responsiveness.
Leveraging experience, technology, flexible products, and a solution-based approach to solving problems, a high-valued lender will respond quickly to new business opportunities and developing client needs.
Fast funding.
Often new business opportunities require fast funding solutions to a financial crisis or a growth opportunity. High-value lenders can assess the opportunity, offer solutions, and qualify the borrower in a few days to provide fast funding solutions.
Lucrative commissions.
A high-value lender will formalize a lucrative commission structure in writing, regularly pay commissions, and provide account activity and commission reporting.
While interviewing lenders, look for evidence of their integrity, agility, accountability, and innovation. These are the characteristics that will form a secure relationship you can trust.
Your Lender Should Offer Multiple Products
There are two types of commercial lenders – alternative and traditional. A high-value lender will have a selection of both types of lending products to provide more money, in more ways, to more prospects. Targeted products and services mean more solutions to get deals done and more revenue to grow your business. Here are some of the products provided by high-value lenders:
Invoice factoring:
Businesses needing fast access to working capital utilize invoice factoring to sell their accounts receivables at a discount in exchange for immediate cash. This alternative strategy is popular with transportation companies, staffing companies, and businesses that can’t qualify for bank loans but has creditworthy customers. Commissions are typically paid out monthly.
The most progressive high-value lenders, such as eCapital, provide additional services to their factoring clients. For example, factoring clients in the transportation space are pre-approved for a revolving line of credit. Additional services create more revenue streams to grow your broker business.
Traditional financing:
The most common type of traditional financing available to commercial borrowers is Asset-based lending.
Commissions are typically 0.5% of the first round of funding.
Visa commercial cards:
A commercial card program offers your clients the option to receive and spend approved funds whenever needed and wherever Visa is accepted. Customized spending options with daily limits plus enhanced reporting provide your clients with extensive expense control and transparency. This easy-to-sell service generates ongoing revenue.
Lenders that provide a selection of lending products create a better experience for your clients and multiple revenue opportunities for you to build a steady referral income. Often, a borrowing company will start with one funding service and need additional capital management services as its business develops. A lender that values you as a referral partner will continue to pay commissions throughout the length of the relationship on both initial and additional lending products. Imagine the rewards gained from a referral that grows to multiple products, and all that is required of you is the initial contact.
Conclusion
Your business as a commercial loan broker is relationship building – and the first relationships you need are with high-value lenders. Having the right lenders in place is like having a high-powered engine under the hood of your race car. Without it, you’ll go nowhere – with it, you’ll accelerate business right off the starting line. Leverage the lenders’ experience and product solutions to elevate your brand as a “go-to” contact for SMBs wanting to work with a business loan broker. Once you have trusted lenders in place, concentrate on prospecting. Let the lender win the business and perform the daily grunt work of managing the borrower – your job is to refer prospects, monitor accounts to whatever level suits you, and watch your revenues grow.
Partnering with high-value lenders puts you in the driver’s seat, picking up speed in cruise control as you seek new avenues to more business.
ABOUT eCapital
Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.
We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.
James Poston
James is an experienced product expert in receivables financing, trade finance including purchase order financing, and asset-based lending. In his role, he oversees eCapital’s sales strategy by driving business development and creating unified revenue generation processes across our organization. Utilizing his experience in developing strategic relationships and nurturing strong networks, James is positioned to expand our company’s market footprint and industry associations.
Prior to joining the eCapital organization, James served as Executive Vice President and Sales Director for Bibby Financial Services Canada. During that time, he participated in all aspects of the organization including operations, credit and finally business development where he was named a 40 under 40 Award recipient by Secured Finance Network.
James is a Chartered Professional Accountant and Certified Management Accountant and holds a Bachelor of Economics degree with concentrations in international relations and political economy from McGill University.