Business borrowing: UK banks vs alternative lenders
Start with a bank if the business has several years of profitable filed accounts, clean credit, security to offer and time to…
Applying and credit
Why use a business loan broker when borrowing money?
What a business loan broker does, how brokers choose their lenders, when going direct makes more sense and the questions to ask about fees and commission.
In this guide
A business loan broker is an intermediary who finds suitable finance for a business, prepares a complete application and approaches lenders whose criteria the business is likely to meet. Using one saves time, reduces the risk of repeated declines that can mark your credit file, and opens up lenders and products you might not find on your own. Smart Funding Solutions is a broker of this kind: we compare lenders across our panel on your behalf, and the lender still makes the final decision.
What does a business loan broker do?
- Understands your situation: your purpose, the amount, your trading history, credit profile and cash flow.
- Checks affordability: a responsible broker will not push you towards borrowing you cannot repay.
- Identifies suitable products: term loans, asset finance, invoice finance, merchant cash advances, revolving credit or tax loans, depending on the need.
- Matches you with lenders: each lender has different criteria, appetite and pricing.
- Prepares the application: making sure documents are complete and figures are presented the way each lender needs them.
- Handles lender questions and helps you compare offers.
- Supports you afterwards, for example with refinancing or future funding.
Benefits of using a broker
How a broker chooses which lenders to work with
Broker or go direct to a lender?
| Going direct | Using a broker | |
|---|---|---|
| Choice | One lender's products | Options compared across many lenders |
| Best suited to | Simple needs, a strong bank relationship and time to shop around | Complex needs, tight timescales, imperfect credit or a bank decline |
| Credit searches | One per lender you apply to | Applications targeted at lenders likely to consider the case |
| Cost | Lender's fees only | Lender's fees, plus any broker fee disclosed before you proceed |
What to check before using a broker
What working with a broker looks like, step by step
The process varies with the size and type of facility, but most cases follow the same broad stages. Knowing them in advance helps you prepare and makes it easier to judge whether a broker is doing the job properly.
- First conversation. The broker asks what the money is for, how much you need, how you would repay it and what has happened with any recent applications. Expect questions about your trading, credit history and existing borrowing.
- Documents. You provide accounts, bank statements, management figures and anything specific to the request, such as quotes or a property schedule.
- Shortlist. The broker identifies the product types and lenders whose criteria fit, and explains why. A good broker tells you if the request is unlikely to succeed as it stands.
- Application. The case is presented to the chosen lender or lenders. Underwriters may come back with questions, which the broker helps you answer.
- Offers. Any offers are compared on total cost, term, security, guarantees and conditions, not just the headline rate.
- Completion. Once you accept, the lender completes its checks and legal work, and funds are released.
You stay in control throughout: lenders make the decisions, and you decide whether to accept any offer. Any broker fee should be explained before you proceed. Our guide on how to apply for a business loan covers the application stages in more detail.
How Smart Funding Solutions works
This guide is general information, not financial advice. Lenders set their own criteria, rates and terms, and all finance is subject to status.
Quick enquiry
Want to talk your situation through?
Not ready for the full application? Leave a few details and a broker will call you to talk it through. It is free, with no obligation.
- One short conversation, no paperwork yet
- Whole-of-market search across 300+ lenders
- Or call us on 01244 267694
FAQs
Common questions
How much does a business loan broker charge?
It varies. Some brokers are paid only through commission from the lender, while others also charge a fee depending on the work involved. A reputable broker tells you clearly whether a fee applies, how much it is and when it is payable before you proceed. Always ask how the broker is paid, including any commission, so you can compare the total cost of the finance.
Does using a business loan broker affect my credit score?
Speaking to a business loan broker does not in itself affect your credit score. Some lenders may use a soft search at the early stage, which other lenders cannot see, but a full search usually happens when a formal application is made. A good broker targets the lenders most likely to consider your case, which helps avoid several full searches building up on your file from repeated applications to unsuitable lenders.
Can a business loan broker help if my bank has declined me?
Yes, a declined bank application is one of the most common reasons businesses use a broker. Ask the bank for its reason, as a short trading record, thin margins or credit issues each point to different lenders and products. A whole-of-market broker can approach specialist and alternative lenders whose criteria may fit. Our guide to banks vs other lenders explains what to do after a decline.
How do I know if a business loan broker is legitimate?
Check that the firm is on the FCA Register if it arranges regulated credit, ask how its fees and any lender commission work, and be wary of anyone promising approval or fixed timescales. A legitimate broker explains which lenders it works with, discloses any fee before you proceed and makes clear that the lender makes the decision. You can search firms on the FCA Register.
Can a sole trader use a business loan broker?
Yes, sole traders can use a broker to compare lenders in the same way as limited companies. A broker can identify lenders that accept self-assessment tax returns and bank statements, rather than filed company accounts, and present the case clearly. Finance of £25,000 or less to a sole trader or small partnership can be regulated consumer credit, so check that the broker is authorised for that work. See sole trader loans for more.
Do I have to accept a loan offer a broker finds for me?
No. A broker presents the options and helps you compare them, but the decision to accept is yours. If no offer suits you, you can walk away. Check the broker's terms at the outset, though, so you know whether any fee becomes payable at a particular stage, and ask for any fee and commission arrangements to be set out in writing before you proceed.
Can a business loan broker arrange larger or secured facilities?
Many can. Brokers are not limited to small unsecured loans; depending on their panel, they arrange secured loans, commercial mortgages, asset finance, invoice finance and acquisition funding. Smart Funding Solutions arranges facilities from £10,000 to £20 million, working with a panel of 300+ lenders. Larger or secured cases involve more documents, a valuation where property is involved and legal work, so they usually take longer.
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Simon was fast, kept us updated at all stages and was a real pleasure to work with on our asset finance. I highly recommend this company: excellent service all round.
Spoke with Simon, who managed to get me the loan I needed promptly. The whole process was very smooth and was completed within a few days.
Getting a business loan can feel like a bit of a minefield, but everything was broken down for me in great detail. Will use again in the future!
Simon was a pleasure to deal with and helped us find a business loan that matched our growth goals and future expansion plans.
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