Why use a business loan broker when borrowing money?

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.

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.

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.

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.

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.