The Difference Between Business Finance Brokers and Lenders


When it comes to securing financing for your business, there are a few different avenues you can explore. Two of the most common options are working with a finance broker or directly with a lender.


While these may seem like interchangeable terms, there are some important differences between the two which can impact your overall experience and results.


In this article, we’ll take a closer look at what business finance brokers and lenders are, how they differ from one another, and how to determine which one may be the best fit for your unique needs and goals.



brokers-vs-lenders what are the differences?

What is a Business Finance Broker?


A business finance broker is a professional who acts as an intermediary between businesses seeking financing and the lenders or investors who provide the finance facilities.


Brokers work with a wide range of lenders, from traditional Banks and alternative lenders, to find the best financing options for their clients.  They can help businesses secure all types of financing, from short term business loans to lines of credit to equipment financing and more.


Brokers typically have extensive knowledge of the lending industry and can provide valuable guidance throughout the financing process. They also often have established relationships with lenders that can help accelerate the funding process.


For example, a finance broker will provide numerous facilities to customers from a finance company, therefore gaining more favourable terms from the finance company as opposed to the customer going direct to the finance company – in this instance they will generally only provide 1 facility.


One of the main benefits of working with a business finance broker is that they can help businesses navigate the often complex and confusing world of financing.


Finance brokers can help businesses understand their options, compare different financing facilities, and find the right lender for their requirements.


They can also help businesses prepare their financing applications and ensure that they are presenting themselves in the best possible light to lenders, with the correct information that the underwriter will require.




What is a Business Lender?


A business lender is a financial institution or individual that provides financing directly to businesses.  Lenders can be traditional Banks or alternative lenders such as online lenders or peer-to-peer lending platforms.


They offer a wide range of financing options, from small business loans to lines of credit to commercial mortgages and more.


Lenders typically have specific criteria that businesses must meet to qualify for financing, such as credit score, revenue, and time in business, to name but a few.


It’s important to note that working with a lender directly can also be more challenging for businesses, particularly those with less-than-perfect credit or a short time in business.


Lenders may have strict criteria that businesses must meet to qualify for financing, and the application process can be time-consuming and complex.


Additionally, businesses may not have access to the same range of financing options that they would through a broker.




Differences between Business Finance Brokers and Lenders


While both business finance brokers and lenders play a key role in helping businesses secure financing, there are some important differences between the two. One of the main distinctions is that brokers act as intermediaries between businesses and lenders, while lenders provide financing directly to businesses.


Finance brokers work with a wide range of lenders and can help businesses compare different financing options and prepare their financing applications.


Lenders, on the other hand, typically have specific criteria that businesses must meet in order to qualify for financing and may have more limited financing options available.


There are also differences in the level of support and guidance that businesses can expect from brokers and lenders.


Brokers can provide valuable guidance throughout the financing process, helping businesses understand their options.


Lenders, while providing financing directly, may not offer the same level of support and guidance that brokers can.




Advantages of working with a Business Finance Broker


Working with a business finance broker can offer several advantages for businesses seeking financing.


Working with a broker is that they can help businesses save time and effort.


Brokers have established relationships with a wide range of lenders, which increases the number of places to apply. But more importantly, brokers will know which lender is more likely to approve an application, reducing the chances of declined application and therefore protecting credit scores and reducing wasted tome.


They can also help businesses compare different financing offers and ensure that they are getting the best deal possible for their requirements.




Advantages of working with a Business Lender


Working with a business lender directly can also offer several advantages for businesses seeking financing.


Working directly with a lender can result in a faster funding process, but not always, as there is no middleman involved, providing your business meets the eligibility criteria and that you have all the required information and documentation ready to submit with your application.


However, it’s important to note that working with a lender directly can also be more challenging for businesses, particularly those with less-than-perfect credit or a short time in business.


Lenders may have strict criteria that businesses must meet to qualify for financing, and the application process can be time-consuming and complex.




How to choose between a Business Finance Broker and a Lender


Choosing between a business finance broker and a lender can be a challenging decision for businesses.  There are several factors to consider, including the type and amount of financing being sought, the business’s credit score and time in business, and the level of guidance and support needed throughout the financing process.


Businesses should consider their specific financing needs and goals.  Brokers can help businesses compare different financing options and know which lenders to approach as many lenders do not offer specialised financing products required by many businesses today, for example asset finance, tax loans and other specialist finance products.


Businesses should carefully evaluate their options and choose the financing partner that best meets their unique needs and goals.


Common misconceptions about Business Finance Brokers and Lenders


There are several common misconceptions about business finance brokers and lenders that can impact businesses’ decision-making.


One of the main misconceptions is that brokers are only beneficial for businesses with poor credit or a short time in business, brokers are able to assist a wide range of businesses in securing finance.


Another misconception is that working with a broker will result in higher financing costs, in many cases they can help businesses secure more favourable financing terms as they have access to a wider pool of lenders, which can ultimately save businesses money in the long run.


Additionally, some businesses may believe that working with a lender directly is always the best option.  While working directly with a lender can have advantages, such as lower financing costs, it may not be the best fit for all businesses.


Some lenders will only work with brokers and won’t deal with customers directly and will give a lower cost facility via a broker because of the previous relationship with the broker.  


Brokers can provide valuable guidance and support throughout the financing process, helping businesses understand their options and negotiate the best possible financing terms and rates.




When to consider working with a Business Finance Broker or a Lender


When it comes to securing financing for your business, there are several options to consider. Working with a business finance broker or a lender directly can both be viable options, depending on your unique needs and goals.


By understanding the differences between these two financing partners and carefully evaluating your options, you can make an informed decision and feel confident in your ability to secure the funding you need to help your business thrive.


It is important to note that not all brokers are the same.  If you choose to work with a broker, then it’s important to check that the broker is authorised and regulated by the Financial Conduct Authority.  It would also be prudent to check the broker’s past history and what types of customers they have dealt with previously.





Whilst RLA Capital cannot offer financial advice, we can provide various business loans to assist with cash flow.  RLA Capital would recommend speaking with your accountant if you are experiencing cash flow problems.



Updated: Oct 16, 2023