A Finance Broker Can Help a Business Get a Loan
It’s well known that the first year of operation is the most challenging for any business, regardless of the industry that they operate within and no matter whether they sell products or services. It’s not just the starting balance of an organisation to consider when approaching the new tax year, as in most cases a company owner will rely on this initial cash flow to fund their activities.
Even this sum isn’t always enough and that’s where applying for a loan can come in handy. But with so many stringent checks, not to mention banks and lenders requiring a variety of information before even considering the application – it can be a pretty challenging task for a company manager to address without support.
Fortunately, finance brokers are always on hand to help new businesses to obtain loans of any amount – but why can they be so much more effective than attempting the application alone? Here’s a little information on how hiring a finance broker can help a business get a loan.
An understanding of the application process
The definition of a finance broker is a professional that aids in the approval of a loan from a bank, building society, or credit union. These institutes are notoriously stringent when it comes to lending money and although not openly acknowledged, it’s not uncommon for them to refuse to loan money to new businesses, as the risk involved is far more substantial than doing the same for an established organisation.
A broker agent will act to negotiate on behalf of the applicant and as they will typically have a firm understanding of the application process, the likelihood of being granted approval will be increased. A good broker will know the right channels to go down, as well as being able to offer financial advice to the applicant that can help them to prepare their application.
During the application process, a variety of information will be required from the applicant and although it will remain their responsibility to provide this data – the broker will take care of all submissions and negotiations. Their experience within the field will allow them to approach the most likely lenders and once sourced, the negotiation process will begin.
Negotiating the interest rates on loans
It’s not unheard of for banks and lenders to propose quite intensive terms relating to interest rate repayments. If a company isn’t careful, they could find themselves in such a desperate position that they accept the higher than average interest rates. Although thousands of business in Australia face this difficulty on a yearly basis, the reality is that obtaining a better deal isn’t challenging if the applicant has the right resources at their disposal.
That’s where a financial broker steps into the fray and not only will they be able to identify the best deals, they will also be able to recognise the best financial institutes to apply to, in order to receive these reductions in costs. As strict as lending agencies can be, they do still rely on investments from businesses of all sizes, and so if a broker is able to properly represent an applicant the chances of being approved will be far more substantial.
Obtaining the best deal possible on repayments
The whole purpose of a business loan is to receive a lump sum from a lender, spend the cash on assets for the company and then repay what is owed with interest, over time. As mentioned above, these interest rates can often be high, and although prone to fluctuation – there are still factors that can help to minimise the costs. For example, if a bank is willing to lend $20,000 to a new company at an agreed rate, they may be willing to decrease this rate and prolong the repayment duration, if the company instead borrow $25,000 for example (as the interest will be paid back over a longer period of time, resulting in a greater amount of profit).
Although many business owners are happy to undergo the application process themselves, the fact is that a reputable broker will be able to offer an extensive range of benefits that won’t be obtainable otherwise. From negotiating in order to enjoy lower interest rates, all the way to pushing banks and lenders a little further and receiving approval for larger loans – a good broker can go a long way and are definitely worth the investment.