How do business finance brokers get paid?
We are paid commission by the lender when a facility completes, and we charge you nothing at any point. That arrangement has an obvious risk attached to it, and the honest thing is to name it rather than hope you do not notice.
The risk, stated plainly
If a broker is paid by the lender, and lenders pay different amounts, then a broker has a reason to prefer one lender over another for reasons that have nothing to do with you. Anybody who tells you this is not a real conflict is not being straight with you.
What stops it here
Our ranking ignores commission entirely. It scores on cost, how well the product fits, how fast a decision comes and how likely the lender is to say yes. Commission is not an input and is not in the file that does the scoring.
Some brokers also charge the customer a fee on top, sometimes a percentage of the facility. We do not, and you should always ask, because it is not always volunteered.
How commission is usually worked out
Commission is normally a percentage of the amount borrowed, paid by the lender once the facility completes. It varies between lenders and between products, and some lenders also pay brokers more for the volume of business they send. On some products it can also rise with the rate the customer pays. That last arrangement is the one to ask about by name.
Commission is an ordinary part of how business finance reaches customers, and it is not a sign that anything is wrong. Not being told about it is.
What you can fairly ask any broker
- Are you paid by the lender, by me, or by both?
- Does what you earn change with the lender I end up with, or with the rate I pay?
- How many lenders did you look at for me, and why these ones?
- Is there anything to pay if I do not go ahead?
A broker who answers those plainly is one you can work with. One who changes the subject has told you something as well.
Panels
Most brokers work from a panel, a set of lenders they have agreements with. That is normal, and ours is described in our terms of business. Ask how many lenders are on a broker’s panel and of what kind, because a panel of three is a very different service from a panel of thirty.
Common questions
Will I pay a higher rate because I used a broker?
It depends on the product. On many, the lender’s price is the same either way and the commission comes out of its margin. On some, a broker can set the rate within a range and earns more towards the top of it. That is the arrangement worth asking about directly.
Do brokers get paid if my application is declined?
Lender commission is normally paid only when a facility completes, so a broker paid that way earns nothing from a decline. Some brokers charge an upfront or arrangement fee whatever the outcome. We do not.
Is it rude to ask a broker what they earn?
No. It is a fair question about a deal you are being asked to sign, and a broker who expects to be trusted should expect to be asked. How we are paid is set out in writing in our terms of business.
Can a broker guarantee my application will be approved?
No. The lender makes the decision, and a broker promising approval before a lender has seen your file is promising something it does not control. What a good broker can do is tell you honestly which lenders are likely to say yes, and which are not worth the search.
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