Beginner’s Guide: How to Be a Successful Business Loan Broker
- The goal of every small business loan broker is to help clients select the best lending company and structure the most favorable loan terms. They assess their client’s business and submit a loan application to lending companies on their behalf.
- The first thing small business loan brokers do is evaluate their client’s company. The next step is to find potential lenders who are willing to offer favorable loan terms. After brokers find a loan with reasonable terms and structure, they inform their clients of the fee in the event they are approved.
A business loan broker is just like any other broker you work with. For instance, real estate brokers connect you to real estate, while business loan brokers connect you to commercial business loans, equipment loans, SBA loans, and other financing options.
The goal of every small business loan broker is to help clients select the best lending company and structure the most favorable loan terms. They assess their client’s business and submit a loan application to lending companies on their behalf. Loan brokers are knowledgeable about the different types of loan products and they have a wide network of lending partners, from traditional lenders and alternative lenders to credit unions.
If you’re thinking about switching careers and you want to be a successful loan broker, this special report can help you get started.
One that allows you to be your own company, gives you 100% of your earnings, and offers you the authority and prestige of a white collar professional without the costly and time-consuming education requirements? Then to be a loan broker could be a good fit for you. On how to become a loan broker, you’ll need to have a passion for money, a desire to serve others, the appropriate training, and excellent connections with lenders.
What Do Small Business Loan Brokers Do?
Applying for a business loan is risky and it shouldn’t be taken lightly. A lot of thought goes into the entire process and business owners need to consider several factors before committing. Since there are different types of loans for every business need, entrepreneurs often seek the help of loan brokers to assist them in choosing the most suitable option.
The first thing small business loan brokers do is evaluate their client’s company. The next step is to find potential lenders who are willing to offer favorable loan terms. After brokers find a loan with reasonable terms and structure, they inform their clients of the fee in the event they are approved.
The broker’s fees are typically included in the closing costs of the loan. Some small business loan brokers will deny the loan application fees, while others demand payment regardless of the outcome.
The SBA loan brokers work with banks and commercial lenders to help new and existing small companies purchase or develop their enterprises. SBA lending is intended to help small businesses that have been unable to obtain standard bank financing.
The Sba loan broker also needs the initiative to identify businesses in need of financing and accurately determine which type of loan works best for them based on their goals and current financial situation. The ability to make quick and accurate decisions also plays a huge role in becoming successful. Additionally, aspiring brokers need to have financial literacy to quickly assess clients’ financial details.
How to Become SBA Loan Broker?
The following will give you ideas on how to become SBA loan broker:
The small business borrower is financed by an SBA lender, and the lender’s loss is guaranteed by the US government if the small business lender fails on the loan. Since the SBA guarantee reduces risk for banks and lenders, commercial lenders are more likely to grant loans that they would not have otherwise approved. Also because SBA is absorbing the majority of the risk as guarantor, the SBA needs the small company owner and the lender to follow specific standards in order for the SBA guarantee and funds to be granted. The borrower’s SBA loan broker will assess which sort of SBA loan is best for them. The SBA 7(a) and SBA 504 programs are the two key choices your SBA loan broker will examine for your aims.
How to Become a Business Loan Broker?
Anyone can be a loan broker and take advantage of loan brokering business opportunities. However, there are certain skills and requirements that you need to know about before pursuing a career in loan brokerage. Many people are dissatisfied with their occupations since there is no opportunity for progress. You can also be afraid of being laid off or want to be your own boss. Regardless, you want to pursue your dream of being a business loan broker. You’ll need to learn how to become a loan broker, but first, you’ll need to know what they do.
How to be a Loan Broker: Training
On how to be a loan broker the first step is to finish a one to a two-week training program. Training gives you the knowledge, expertise, and vocabulary you’ll need to effectively communicate in the industry. This firm foundation will secure your company’s success for many years to come. Each training program you’re contemplating should be thoroughly researched. It’s a huge first step toward becoming a loan broker, and you want to be sure you choose the correct curriculum. We strongly advise you to conduct as much research as possible before making a decision.
What are the Requirements to Become a Business Loan Broker?
Anyone can become a loan broker and take advantage of any business loan broker opportunity. However, there are certain skills and requirements that you need to know about before pursuing a career in loan brokerage.
You don’t need a college degree to become a small business loan broker. In fact, many successful brokers started with a GED or a high school diploma. But if you’re planning to get into brokering mortgages or commercial loans, you need to have a four-year bachelor’s degree in economics, finance, psychology, business, or communications.
These degrees come in handy when it comes to analyzing financial statements, negotiating deals, and turning conversations into closing deals. Basic knowledge in accounting and banking can also help in matching clients to the right type of funding.
You might also be required to undergo different commercial loan broker training programs where you’ll go through refresher programs to keep you up to date with the latest knowledge and trends.
Aside from education, aspiring business loan broker need to possess “soft skills” to succeed in their field. Since a loan broker deals with many different types of people from various backgrounds, it’s important to have interpersonal skills that allow you to speak professionally and confidently.
It’s easier for you to secure a job as a business loan broker if you have experience in the following industries:
- Customer Service
To build your resume and increase your chances of getting hired, you can apply for internships at banks and brokerage firms. Many employers offer small business loan broker training to new business loan brokers which helps them hone their skills.
In this training program, you may be asked to apply what you have learned in real-life situations. After the training, your employer will assign you to independent projects and watch how well you perform in dealing with clients, evaluating financial statements, and assessing loan applications.
4. Business Finance Broker Training
To become a loan broker, you need to undergo financial loan broker training to learn networking and mathematical analysis skills. Companies often sponsor training initiatives and refresher courses for new employees.
With commercial broker training, you’ll be able to know everything you need to know about running a successful loan brokerage. From comprehensive training, marketing, and branding, to networking with lending sources, business loan broker training gives you the tools you need to become a successful loan broker.
5. Licenses and Other Requirements to Start a Loan Broker Business
In most states, you don’t need to get a license to start a brokerage business. However, be sure to do your research to know whether you need a license in your state or not. Your state has a licensing board that provides all the necessary information. You can also check in with your local Small Business Administration branch.
What is the Income Potential of Business Loan Brokers?
When it comes to income potential, business loan brokers enjoy a booming career with countless opportunities to build a steady income. Brokers are usually paid through commissions ranging from a few thousand dollars to a few million. The amount they receive depends on several factors, such as the level of experience, market conditions, and geographical area. But on average, a small business loan broker earns approximately $134,000 annually. For top brokers, they may earn more than $150,000 per year.
How to Become a Business Loan Broker in 5 Steps
The following will give you ideas on how to become a small business loan broker and how you can start your commercial loan broker journey:
1. Research on Different Loan Broker Training Programs
If you want to become a successful loan broker, you must have the right training. Most brokerage firms offer online and/or in-person training courses for aspiring brokers. These business loan broker programs typically last for a week, or longer for more intensive training.
Some even offer flexible and less frequent class scheduling. The cost of private training courses typically begins at a few thousand dollars.
Loan broker training doesn’t come cheap. To make the most out of your investment, be sure you do your research before signing up for a specific course. Compare different course syllabuses and determine the type of business management skills, connections, and tools the provider offers.
On a basic level, the training should cover networking and mathematical along with analytical skills. Also, make sure the courses you choose to meet any licensing requirements in your state. It’s also worth noting, training programs that offer certification may increase opportunities for employment and help attract more clients if you decide to go into business.
You can check out the International Association of Commercial Finance Brokers here for training courses available in your area.
2. Apply for an Employer Identification Number (EIN)
It helps to apply for an Employer Identification Number (EIN) even if you don’t have employees, for the simple reason having one can facilitate bank accounts and business licenses applications. You can apply for an EIN online through the Internal Revenue Service’s website. To know more about EINs, specifically the registration and the application process, you can visit the IRS’ website for additional information.
3. Apply for a Local Business License and Open a Business Bank Account
If you decide to put up your brokerage firm, you’ll need to apply for a local business license. You can apply at your local city hall where you will be required to pay the required fee. Remember that most business registrars need your EIN to qualify for a license, so be sure to have it with you when you apply.
The next step is to open a business bank account and be sure to bring your business license and your EIN with you. Also, open a business checking account so you can pay for business purchases using a company check. This way, you will be able to track your finances in an organized manner.
4. Establish a Relationship with Reputable Lending Companies
Another important step is to establish a positive relationship with several lending companies. It’s best to start with three to four lending companies as possible sources so you can present several options to potential clients.
Not all lending companies are created equal, so take note of the requirements different companies have for approving loan brokers. Don’t hesitate to negotiate commissions and residual payments for referrals as well.
5. Look for Potential Clients and Market Your Business
Once you have everything ready, it’s time to look for potential clients. You can utilize online and offline marketing strategies for a wider reach. Print business cards, brochures, flyers, and other advertising materials. In your brochures, you can include the benefits of working with a loan broker or how small business loans can help their company.
More importantly, make your brokerage’s presence known online. Create a website and sign up on different social media platforms. Thoroughly explain your brokering services and indicate how you can help small businesses grow through small business loans.
Create useful content for your target market, such as blog posts, webinars, video content, and more. You might want to hire professional web developers, writers, and graphic designers to design your website and create high-quality content.
Lastly, you can visit small businesses in your area and leave your business card and brochure with business owners. Inform them of your services and tell them to contact you if they need additional financing.
Start Your Journey to Become a Small Business Loan Broker Today
With the right training coupled with determination and hard work, the benefits of being a loan broker are limitless. As a broker, you can create your own schedule, work with a team of like-minded individuals, and help business owners take their business to the next level.
Being a business loan broker is a great career for anyone who wants to dabble in the finance industry but cannot afford to pursue a banking education. Additionally, you don’t need overwhelming startup capital to become a broker. You also don’t need years of experience or a degree in finance.
Having a strong work ethic, proper training, connections to bankers, lenders, mentors, and a passion for what you do, are some of the keys you need to be successful in the business broker industry.
Keep in mind that building a network of reputable investors, bankers, and clients will take time along with a great deal of effort. Stay positive, don’t be discouraged, and always trust the process.
Frequently Asked Questions
How long does it take to become a loan broker?
As mentioned, there’s no formal education to become a business loan broker. However, you’ll have to go through a two-week (or more) training to learn the ins and outs of the industry. After that, you’ll earn your certification and start working as a business loan broker for business loan providers.
How much do business loan brokers make?
Business loan brokers generally earn a commission of 1% to 17% of the loan principal. To put it into perspective, if a business owner is approved for a loan amounting to $50,000, the business loan broker will earn around $8,500, assuming they get 17%. Often, the broker fees are passed on to the small business owner (borrower).
Some business loan brokers, specifically those specializing in SBA loans, may charge lower fees. These brokers will typically earn a maximum of 3% of the approved loan principal.
How does a loan broker get paid?
Loan brokers earn a commission (usually a percentage of the loan principal) from the business loan providers. Typically, they get paid after the loan closes and the funds are disbursed to the borrowers.
How do I start my own loan broker business?
After completing the loan broker training, you’ll have to comply with several requirements before you can launch your business. This includes:
- Securing the necessary licenses
- Registering your brokerage with the Secretary of State
- Obtaining your Employer Identification Number (EIN)
- Trademarking your brokerage’s name with the US Patent and Trademark Office