Understanding the difference between brokers and lenders
As you consider various sources of funding for your business, be certain you know if you are dealing with a broker or directly with the lender (also known as a principal). In many cases, the websites or brochures you may be reviewing do not explicitly state if the company you are considering is a broker or not. In some cases they may not offer the same financing services a firm like ours does.
Working with a broker is a different experience than working directly with the firm that provides your financing. While brokers say that they can "shop" around your needs around to get you the best deal, the reality is that in many cases, the commissions they receive and the fees they charge make them a more costly option for your financing needs. If you are talking to a broker, consider these questions:
| Question to consider | Lenders (Capital Solutions) |
Brokers |
| Can the person I'm dealing with give me specific details about my financing options? | Yes. As we are the actual lender, we can be specific about what our terms and costs will be for your needs. | No. Since they are not the lenders and won't know who will provide your financing until later in the process, they cannot give you accurate information about what rates or terms you will receive. |
| Who handles my account? | Capital Solutions, as the lender, will explain the details of our services and go over our rates and terms with you. Once you agree to finance with us, one of our operations managers will be in charge of your account. | Initially, you deal with the broker, but that relationship ends once he/she places your financing. After that, it will depend on who is financing you. |
| Are there any "middle-man" costs? |
No. We provide the financing, so there's no middle-man involved. |
Yes. Brokers may take up to 20% of fees you pay which raises the overall cost of your financing. |
| Will I be charged any up-front fees? | No. | Most brokers charge you a non-refundable fee to use their services - a fee that can go up as high as $1,500. |
| Will my confidentiality be protected? | Only our officers and our auditors are privy to your information. We pledge to keep all information related to your account confidential. | Brokers usually offer your deal to four or more lenders and don't usually reveal who they contact. Some of those lenders might check your credit without your knowledge. |
| Will the financing be structured to the specific needs of my firm? | Yes. As the lender, we can tailor our terms to meet your specific needs. | Since the broker is paid by a commission, his or her interest is in placing your business with the financing source that provides the largest payday, not the best fit for your needs. |
Save money by dealing directly with the lender, not a broker. If you happen to talk to a broker, here are questions to ask. Learn more about the financial services we offer. Contact us to see how we can help your business grow.
