5 Things Your Loan Broker Should Tell You

1. How They Get Paid (And What That Means for You)

Loan brokers earn commission on funded deals — typically 1–5% of the loan amount, paid by the lender. On a $200,000 loan, that is $2,000–$10,000. Some lenders pay higher commissions than others, which creates an incentive for brokers to steer you toward higher-paying lenders regardless of whether they offer the best terms for you. The commission is usually built into the rate you pay — the lender prices it into the loan. A lender paying a 3% broker commission might charge you 1–2% higher APR than they would on a direct application. Whether the broker's expertise (better matching, saved time, negotiation skill) is worth that premium depends on the specific situation. Here is what to ask your broker: "How are you compensated on this deal? Which lender on your panel pays the highest commission? Is that the lender you are recommending?" A good broker will answer transparently. An evasive response tells you what you need to know. Full transparency: at LendWorks Connect, we disclose our compensation structure to every client. We believe transparency builds trust, and trust builds long-term relationships that are more valuable than any single commission.

2. Whether You Qualify for Cheaper Options They Don't Offer

Every broker has a lender panel — the set of lenders they work with. No broker works with every lender. If your profile qualifies you for a product that is not on your broker's panel, you will never hear about it. The most common gap: a broker who specializes in alternative lending (MCAs, online term loans) may not have SBA lenders on their panel. If your credit score is 700+ and you have been in business for 3 years, you likely qualify for SBA financing at 8–12% APR. But if your broker only places alternative products, they will recommend a 20% APR term loan — not because they are dishonest, but because that is what they have access to. The reverse happens too: an SBA-focused broker may not have fast, flexible alternative lenders on their panel. If you need $50,000 in 48 hours, they cannot help — but rather than losing the deal, they might try to push you through a product that takes too long. Protect yourself by getting quotes from at least two different brokers or platforms. Or use a marketplace like LendWorks Connect that matches across product types — SBA, term loans, MCAs, lines of credit, and more — so you see your full range of options.

3. The Total Cost in Dollars, Not Just the Rate

Brokers love to quote rates because rates sound manageable. "You qualify for a 1.25 factor rate" or "I can get you 18% APR." These are abstract percentages. The number that actually matters is the total dollar amount leaving your bank account over the life of the financing. A $150,000 MCA at a 1.30 factor rate costs $45,000 in total fees. A $150,000 term loan at 22% APR over 36 months costs approximately $53,000 in total interest. The MCA looks cheaper — until you realize you repay it in 8 months while the term loan spreads the cost over 3 years. The MCA's annualized cost is actually 2–3x higher. Every time a broker quotes you a rate, respond with: "What is the total repayment amount?" and "What is the total cost of capital in dollars?" These two questions cut through rate abstraction and force a direct comparison. Any broker who cannot answer these questions immediately is not doing their job.

4. Whether Refinancing Out Is Realistic or Theoretical

One of the most common broker pitches for expensive short-term financing is: "Take this now, and we will refinance you into something cheaper in 6–12 months." This is sometimes true and sometimes a convenient story to close the deal. The reality: refinancing requires that your credit profile, revenue, and business trajectory improve enough to qualify for better terms. If you are taking a high-cost MCA because your credit is 580 and you have 8 months in business, six months from now you will have a credit score of maybe 610 (if you have been managing it actively) and 14 months in business. Those are improvements, but they may not be enough to qualify for a dramatically cheaper product. Additionally, the existing MCA creates a UCC filing on your business assets. Some lenders will not approve new financing while an active UCC exists. You may need to fully pay off the MCA before refinancing is possible. Ask your broker: "What specifically needs to change in my profile for the refinance to happen? What credit score? What revenue level? What time in business?" If they cannot give you specific numbers, the refinance promise is aspirational, not planned.

5. What Happens If Your Business Dips — The Default Scenario

No broker wants to discuss default. It kills deals. But here is what a responsible broker should explain before you sign. If your revenue drops and you cannot make payments, the consequences depend on the product type. For MCAs: the provider can freeze your merchant processing account, block your bank account (if the agreement allows it), file suit under the personal guarantee, and pursue confession of judgment (in states where it is enforceable). The speed of MCA enforcement is one of the fastest in financial services. For term loans and lines of credit: the lender will typically attempt to work with you first (payment deferral, loan modification). If that fails, they will pursue the collateral (if secured), then the personal guarantee. The process is slower but still consequential. For SBA loans: the SBA has one of the more borrower-friendly default processes. Lenders are required to attempt workouts before liquidation. The SBA also offers disaster and hardship deferment programs. However, the personal guarantee is still enforceable, and the SBA's collection agency (Treasury Department) is persistent. Before signing any financing agreement, ask yourself: "If my revenue dropped 30% tomorrow, could I still make these payments?" If the answer is no, the financing is too aggressive for your current cash flow.

Frequently asked questions

How do I know if my broker is recommending the best option?

Get competing quotes from at least one other source. If your broker is recommending the best available option, the comparison will confirm it. If another source offers significantly better terms, ask your broker why they did not present that option.

Are loan brokers regulated?

Regulation varies by state. Some states require commercial loan broker licenses; others do not. SBA lending requires lender (not broker) licensing. The lack of universal broker regulation is why due diligence on your broker is as important as due diligence on the loan terms.

Can I negotiate broker commission?

Broker commission is typically paid by the lender, not the borrower. However, you can negotiate the overall rate — and a lower rate may result in lower broker compensation. Asking "Can you do better on the rate?" is always appropriate.