If you bring us a contract with a better offer, we guarantee to either beat that rate or pay you $500.

Business Loan Broker VS Direct Lender: Who Wins?


Business Loan Broker vs Business Direct Lender – Which is Better?

How important is it to work with a loan broker vs direct lender to secure financing for your business, or would you prefer to approach a lender directly?

Many small businesses struggle to find financing because they don’t understand how the lending industry works. Most small business owners don’t even know where to look for loans.

loan broker vs direct lender

They often ask themselves, which is better, a business loan broker vs. a direct lender?

If your credit is excellent, you may want to apply for a business loan from a bank. However, if you doubt your eligibility for a direct business loan, you may want to investigate the services of a loan broker or an Internet direct lender.

A loan broker helps you apply for a business loan with various lenders. They may also be able to recommend lenders willing to lend to smaller companies. But before you decide to work with a loan broker, make sure you understand the pros and cons of working with one versus going directly to a lender.


What is a Loan Broker vs direct lender

Small business owners can benefit from a Small Business Loan Broker (Commercial Loan Broker) because they can access loans and many business finance products through the broker’s extensive network of loan programs, lenders, and funders.

A commercial broker is an intermediary that helps businesses obtain financing with the best loan option. These intermediaries act as a go-between for companies looking for loans and investors willing to provide them. Commercial brokers can help businesses access capital at lower costs and rates than if they were to secure funding directly. Brokers also offer other benefits like increased visibility and credibility for their clients.

Financial intermediaries like brokers for business loans help entrepreneurs find suitable financing options by assessing their specific needs. Small business loan brokers often receive compensation from the lender or funder who referred them to their client rather than charging the business owner any fees at the outset of the loan process or completion.

Depending on the loan type, some brokers can charge anywhere from 1% to 5% of the total amount borrowed as a loan origination fee.

Banks and other financial institutions usually provide business loans. However, many business loans are available, and not all types are available at banks, credit unions, or traditional lenders.

financial products

Financial products that a business loan broker (Commercial Loan Broker) typically offers include, but are not limited to, the following:

  • Long-term business loans
  • Small business administration loans
  • Business lines of credit
  • Short-term business loans
  • Merchant cash advances
  • Business cash advances
  • Financing for equipment
  • Financing for invoices
  • Financing for accounts receivables
  • Financing for commercial real estate
  • Funding opportunities for small firms, including venture capital

The notion that using a broker means an expensive loan isn’t necessarily true.

A good business loan broker will provide you with a personalized loan solution, help you identify the correct type of business funding options for your needs, and connect you with the lender that offers the best terms.


Which Business Funding Products Do Business Loan Brokers Focus On?

Asking a loan broker up front what finance products they offer is an excellent way to gauge whether they have a wide enough product range to provide small company owners with the best loan options possible.


What is a Direct Business Lender?

A direct loan is when someone lends you money directly. The term “direct” suggests the lender is lending their capital “directly” to you.

You can get personal, small business, mortgage, or student loans through a direct lender.

A bank will usually lend you money because it has access to other people’s money. It needs to earn a higher rate of interest than what it is paying its customers. It also needs to make sure your loan doesn’t go bad. The result is either charging a higher interest or requiring a personal guarantee or collateral to secure the loan.

A reduced interest rate from a direct lender is possible if you have a high credit score. Banks offer lower interest rates than online or other direct lenders. You may not be able to get a direct loan from a bank if your credit score is poor. The internet lender may, however, be willing to take a chance on you at a little higher interest rate.

A small business owner with a good credit history and business credit may see reduced interest rates and fees when borrowing money through a direct lender. However, this is not always the case.

To reiterate, lenders often offer loans with higher interest rates and fees if you have a poor credit score, even though your business is doing well. The reason is that banks and other financial institutions need to ensure they get paid back.

If they lend you money, they must also pay someone else. So, the lenders charge high interest rates and fees to compensate for the risk that they might not get paid back.


Why Work with a Direct Business Lender?

A direct lender can offer lower interest rates, better terms, and larger loan amounts to certain types of business financing. If your business fits these criteria, you might consider using an online direct lender instead of going through a bank.

Your business financial history will help lenders determine whether you’re a good candidate for direct lending options. Your personal credit score will play a role in determining your eligibility for loans.

A bank must see evidence of your past success before loaning. Lenders will also likely require proof of your ability to repay the loan and firm ownership. As part of the underwriting process, they will probably ask for three years of personal and business tax returns and other financial reports.

The online direct lender may only ask for a few months of bank statements to determine your risk. Larger loans over $100,000 may require one or two years of tax returns and fewer financial reports.

You may already have an established relationship with a bank and need to start there if you have excellent credit and financials. You should try to build a rapport with a direct lender before applying for a loan through them if you don’t already have one. A direct lender knows your situation better and can help you apply for the right type of financing.

On the flip side, you can get pre-approved for loans online. You must provide information about your income, assets, debts, credit history, and employment status. Once you provide this information, you will receive an instant approval or denial letter. If approved, you will receive a short list of stipulations proving the lender’s willingness to lend. Your loan’s entire process and funding can take a few hours or days.


The Differences Between a Business Loan Broker and a Direct Business Lender

Differences Between a Business Loan Broker and a Direct Business Lender

Direct lenders often focus on originating, processing, funding, and servicing payments for a narrow range of products.

Brokers for business loans connect borrowers with lenders and funders but do not provide the loans or ongoing servicing themselves.

Engaging with a Direct Business Lender, who will only provide the loan products they underwrite and fund, is better than engaging with a loan broker.

Many lending companies are not obligated to provide you with the business loan options that best suit your financial situation.

Knowledge, product variety, and connections within the financial world make a loan broker valuable.


How Do Direct Lender Loans Work?

Sunwise Capital has nearly two decades of experience in investment banking and direct lending and can help you get financing at the best rates and conditions possible.

We can save you between half a percent and two percent on interest and up to one percent on bank origination fees, saving you hundreds or perhaps thousands of dollars every month/year. We guarantee it.

We use our capital and connections with high-level bank officials, alternative lenders, and private investors to get the funding we need. In addition to assisting you through the underwriting process, we work with you closely to secure the funds you need to expand your business.

If you need a loan, we will provide the best possible rate and terms on the market. We will help you immediately, from filling out the application to using the money for your business.

We diligently check the loan terms to ensure there are no hidden fees, unreasonable prepayment penalties, or other unfavorable provisions. When we sit at a desk, we sit next to you, not across from you.

Finally, we smooth out the rough edges of the financing procedure.

We offer our loyal repeat business owners better rates and terms to optimize your profits.

Each business has its own set of cash flow difficulties and financial requirements. Over the years, we’ve worked with thousands of companies in dozens of sectors, each with unique financial needs. We will assist you in identifying your special requirements and securing the funds your business deserves.

Our mission is to help you build a strong foundation for your business so that you can provide for your family and future.


Business Loan Brokers vs. Direct Lenders Who’s Better for You?

You’ve heard about loans before but haven’t thought about them until now. Now that you’re looking to borrow money, you’ll want to consider what kind of loan works best for your situation. Should you go with a direct lender or a business loan brokerage? Here are some factors to think about when deciding whether to work with a direct lender or business loan broker:

Business Loan Brokers vs. Direct Lenders Who's Better for You?

 How much money will you need?

 What type of loan will you need?

The answer is not always clear-cut. There is a wide variety of loans, each with its own criteria and terms. Some forms of financing are more straightforward to get approved for than others, and some lenders may offer more competitive rates. Small businesses should consider all options before making any decision about financing.

Direct lenders provide capital directly to borrowers, while brokers match lenders with borrowers. Alternative financing companies often charge higher interest rates than banks because they take a risk that traditional lenders are unwilling to take.

However, if you are looking for a loan, you may not care about the rate or have no choice in which lender approves you. Everyone wants the lowest rates, and you just want your money. As a business owner, you may prefer the variety of quotes from experienced brokers who are business funding experts.


Why work with a business loan broker?

Small businesses always need loans, but there isn’t always enough time to complete paperwork and wait for responses. A business loan broker can help you get the money you need fast. They’ll connect you with a lender who will give you a quick answer, usually within 24 hours.

You won’t have to spend your valuable time waiting for an answer. Business loan brokers have access to a vast network of lenders, so they can get you the money you need even if you’re not near banks.

You may need to turn to a broker if you don’t have experience securing commercial loans. Brokers can help you get started with your commercial loan application and help you secure financing if you qualify for a commercial loan.

If you don’t have much time to devote to the application process, use the services of a small business loan broker. A broker can also help you access multiple lenders at once on an alternative funding platform. Finally, a broker can help you find financing options when you don’t have a strong credit history.

Small businesses often overlook the benefits of using a business loan broker because they think they can get all the same services at lower costs.

However, using a broker has many advantages, including saving time and access to more attractive financing options.

For example, a broker can help you secure funding from multiple lenders simultaneously, leading to an even better deal with appealing funding options.

A broker can also provide valuable advice about your company’s financial health and creditworthiness. Even if you aren’t quite ready to apply for financing, a broker may help you better understand your options and how to arrange a loan package that would appeal to lenders.

Many direct lenders want to see details about your business, including a detailed business plan. A business owner can easily spend weeks or months developing and polishing a business plan.

Appealing to each direct lender can also quickly consume many days or weeks. You’ll have to complete complex forms, provide extensive documentation, and secure business reference letters before many direct lenders approve your paperwork.

An individual lender may also have fewer financing options and tighter approval requirements than you’d like. You might not realize all this until you’ve invested hours on a loan application that won’t get approved.


Can I research loan deals myself

With the internet, researching loan deals yourself has always been possible. Comparison and lender websites can help you get all the necessary information before applying. An excellent place to start is to obtain a free copy of your credit report from a company like Experian.

You should run a credit check to determine if you have a good chance of being approved for a loan. Pulling your credit is not considered a hard pull and will not impact your score.

Once you have your credit score, you may want to investigate which lenders offer the best rates for the loan you need.

Pros and Cons of Direct Lenders

Some direct lenders are unaffiliated, whereas most are financial institutions like banks and credit unions. Direct lenders originate loans from their resources.

Let’s simplify. Say you need to borrow $1000. You know Uncle Bob does it, so you ask him for the cash. If you meet his conditions and agree to his terms, he will give you the money directly from his pocket or bank accounts. This direct connection between you and your lender (Uncle Bob) bypasses any intermediary (broker).

Uncle Bob can sure be a great funding source!

Some direct lenders have a small team of associates from which they pool money or even use crowdfunding sites like Kickstarter. These are “affiliates” because they are affiliates of the direct lender. Direct lenders do not lend money themselves; instead, they use affiliates to collect the funds they offer to lend you.

When you go through a direct lender, you pay interest to that lender. If you borrow $10,000 from your bank, you’ll pay about 5% to 12% interest annually. But if you borrow $10,00 from a credit card company, you’ll pay anywhere from 5% to 25% interest per year.

So, when you borrow money, you should consider the costs associated with borrowing. You may also need to pay fees to get the loan. For example, banks charge fees for opening accounts and credit cards, credit cards often have annual fees, and lenders usually charge closing fees.

All these fees add up.


Pros – Advantages

Lenders may charge additional fees, but there should be no hidden fees. They must have full disclosure and transparency. There are no other fees except for what is on the offering sheet contract or agreement. Direct lenders theoretically can offer loans at lower interest rates and more significant amounts for the most qualified business loan applicant.

If you already have a relationship with a bank, it may help you qualify for a loan. However, it depends on the bank. Some will consider your history with the bank when deciding whether to approve you, and others will not. Some credit unions and smaller lenders are more willing to work with you because they are not beholden to large chains.


Cons – Disadvantages

Many startups don’t get loans because they lack enough collateral or a solid business plan. Direct lenders aren’t always willing to help new businesses, either, especially if they’re not profitable yet. But there are other ways to finance your startup.

You can go through an incubator, crowdfunding platform, or angel investor. If you’re looking for a loan, try a peer lending site like Lending Club or Prosper. You could also start working on your business plan and reaching out to family and friends.

It would help if you investigated all potential direct lenders before applying for a company loan. You may have to fill out an application form online or go to a local bank branch.

If you choose to go to a local branch, you must wait until someone gets back to you with information about your loan application. Once you receive the information, you must complete the paperwork and submit it to the lender. Before obtaining a loan, financial institutions demand borrowers to produce documentation of their financial stability.


Pros and Cons of Business Loan Brokers

A business loan broker is an intermediary with multiple sources and financing access. They don’t lend any money. Instead, he connects borrowers with potential lenders. If you return to our previous example, Uncle Bob might connect you with a few of his friends willing to lend you money. These friends become your lenders. Uncle Bob isn’t lending you any money. He acts as a connection between you and your lenders (a broker).

Uncle Bob may offer to help you free of charge. A business loan brokerage, however, will charge you a fee for doing so. Most brokers get paid directly from the lender, so the broker commission is part of your borrowing costs. Sometimes, you may find the broker gets you a better rate than if you went to the lender directly, even after the brokerage commissions.

However, some brokers will even charge a fee on top of that fee. Additional fees make some folks run away screaming, and rightfully so. Most direct lenders frown on brokers charging other markups on the loan. Indeed, there are outliers to every rule. The lender and broker should discuss this upfront before the process starts.

If the loan is more expensive when using a broker, some consider it worth paying someone else to handle the process for you. Remember, the broker controls all the details for you, so they are fair to get paid.

The question is whether paying someone is worth it for you. If avoiding the hassle is your priority, the cost should be worth it. Ask how much the fee will be before signing any paperwork.


Pros – Advantages

Business loans are hard to come by, and you need to find a lender who will give you money and convince them that you deserve it. A business loan broker knows all the lenders in his network, so he can help you find the right one. Before you apply for a loan, he can also evaluate your current financial situation to determine your eligibility. Utilizing the services of a broker might help you save a substantial amount of time during the application procedure.

Business loan agents can help you avoid scams. If you’re inexperienced in business loans, you may not know what to look for in a scam.

A business loan agent will do all the legwork for you. They will research your company and your financial situation. Then they will help you apply for your business loan. Once approved, the business loan agent will manage the loan until you pay back the money.


Cons – Disadvantages

Some loan brokers charge additional fees for their services. These fees are costs on top of those built into the loan agreement. These extra costs can vary depending on the type of loan.

For example, if you’re applying for a mortgage, your broker will likely charge an origination fee. Your broker might charge a processing fee if you apply for a personal loan.

Brokers also earn money when you close your loan. Some lenders offer incentives like bonus points or cash back. You’ll need to ask about these options before signing a contract.

As mentioned before, it can take anywhere from 1 week to 3 months, depending on what kind of loan you need with a brick-and-mortar institution.

You will also want to consider if you’ll pay any fees along the way. Some companies charge a fee upfront, depending on the lender. If you choose this route, you should expect to pay around 2% of the total amount borrowed.

The most significant difference is direct funding online with a broker. It would be best if you did not have to pay any additional amounts as referenced above.


How Do I Decide Between Business Loan Brokers or Direct Lenders?

If you’re still deciding whether to go with a broker or a direct lender, here are some questions you should ask yourself:

Is your business new?

If you are, then a business loan broker is probably a better choice.

Are you already established?

Direct lenders, like banks, tend to offer better rates because they take fewer risks. These institutions provide the borrower with a limited scope of options, sometimes limited by industry type. Have you created a thorough business strategy, complete with forecasts of revenue and expenses? As a loan provider, the bank may have a loan program that works for your company.

Brokers will often have better options.

When looking at a business loan broker, it is essential to consider because it will affect your decision. You may want to apply for a small business loan if you need the money fast, but you may also want to wait until you get more funding from a different broker or lender.

Generally, a conventional bank’s approval process takes longer when it’s a large business loan. An online lender can fund under $250K in hours, $500K or more in days, and over a million dollars in a week or two.

If you’re looking for a business loan, you may want to start with your bank or credit union. These institutions usually offer small business loans at competitive rates. If you have a personal relationship with your banker, you may feel comfortable asking them about financing options. A business loan broker can also help you navigate the complex world of business loans.


How to Choose Between Available Business Loan Brokers

When deciding whether to go with a business loan broker or not, there are many factors to consider. Here are some of the main ones:


How to Choose Between Business Loan Brokers


Number of Lenders

Ask the broker how many lenders are in their universe. The higher that figure, the better chance you’ll get approved. You may want to back away if they only deal with one lender.

Applying with just one lender cancels out the benefits of using a broker. A broker is there to help you find the best loan product with the best rates and terms. So how can they know what loan product is right for you if they don’t send your info to multiple lenders?

If the lender insists on applying to just one lender, there is a high chance that the lender or the loan they are pushing will not give you the best rates or terms. And honestly, this is about you, not them. You don’t need to do business with them if they aren’t looking out for your best interests.



If they don’t have any privacy agreements, run away! Selling your information to third parties puts you in danger of identity theft and hacking, which is why you don’t want to do it. And if the broker doesn’t protect your information, find another one that will.



How much does the direct lender charge? Do they charge any origination points, administrative fees, or a closing cost? These questions are important because if they aren’t upfront about the fees, you might end up paying more than you expected. You also need to ask if there are any hidden charges. When talking to brokers, ask about any additional broker fees.

It is not uncommon for lenders to change the interest rate after you have applied for a loan, and some will even increase the interest rate if you miss payments. If anyone makes an offer that appears too good to be true, inquire about any hidden fees or interest rates.


Credit Checks

If you apply for a business loan, you must provide proof of revenue. You may also need proof of assets, including business bank statements, tax returns, financial reports, etc. Your lender or broker will review your application and determine whether it’s necessary.

Credit scores are not always accurate; some lenders may use them to determine whether you qualify for a loan. There are other reasons you may see different results depending on the type of lender you choose. For example, some lenders may use your credit report differently.

A business lender may use your FICO score to determine your eligibility for a loan. In contrast, a car dealer may use your Experian credit score to decide whether or not you qualify to buy a vehicle.

Should I go ahead and apply independently with a direct lender?

Businesses often need capital to grow. Banks and other financial organizations offer money to assist companies in starting up or developing.

These loans are usually secured by collateral, meaning the company must pledge something of value as security before getting the loan. Business owners should consider whether they will be able to repay the loan and what kind of interest rate they can expect to receive.

The same holds true if they’re using an alternative or online lender.

If you’re starting, you might not need much money. But even if your company isn’t growing fast, you still might need capital to keep your business afloat. If you’ve already got a steady stream of income coming in, you might be able to get a line of credit instead. And if you’re looking to grow your business, you might consider getting a small business loan.


Evaluate business loans you can apply for today

Several essential factors are important when choosing a business loan broker or direct lender. You should always start with your financial situation and what type of loans you need. Then, ask yourself if you trust the broker/lender. Do they seem honest?

Are they upfront about fees? And finally, do they provide any other services besides processing your loan? If you answer yes to the first three, then you’re ready to move forward!

Be wary of brokers or lenders that sell other services.


How many brokers will see my application?

What you’re asking is, “Will you shop my application?” That question portends, “Will everyone be pulling my credit?”

Whether you go to a direct lender (especially an online or alternative lender) or use a broker, there is a high likelihood that multiple lenders will review your application. If the lenders are doing a “soft pull,” as most do today, it’s OK for various lenders to see your application.

The vast majority are very strict with their internal controls, and the likelihood of fraud or identity theft is low.

Caveat Emptor. Some unscrupulous brokers and lenders will shop your file around, and they do this irrespective of the impact on your credit. Even if there is no impact on your credit, it can generate dozens of unwanted calls from others who say they just received your file.


How many lenders will see my loan request?

The answer revolves around the type of business loan you’re requesting. If you’re using a direct business lender, in theory, they are the only ones seeing your application. That contrasts with when you use a broker who may show multiple lenders your application.

Even direct lenders may shop your loan in today’s marketplace when they can’t help you.

Virtually all online lenders and brokers will do a soft credit pull with no impact on your credit, while most traditional lenders like banks and credit unions will do a hard pull on your credit.


Does the Number of Lenders Who See My Loan Request Affect the Price I Pay?

No. It isn’t always true. Sometimes lenders charge higher rates because they have fewer applicants, and sometimes they charge lower rates because they have more applicants.

However, knowing how many lenders will see your loan request, you can determine whether your broker is looking out solely for your interest or theirs.


How much money am I going to get? 

Will I know what my monthly payment will be? A legitimate broker will tell you exactly how much you will pay in fees. You’ll also have plenty of time to consider your options.

Don’t fall for shady brokers who try to rush you into deciding. Be aware of brokers that “promise” a higher loan amount than you can reasonably expect based on your revenue. Often, these brokers will time your application with multiple lenders to “stack” your loan. This strategy gives the broker a big payday and you, as the owner, an even bigger headache.


What are the Red Flags

Brokers should be easy to reach. If you can’t find any contact info, then it’s probably not safe to give your information to them. Legitimate brokers will provide a physical location and phone number, and brokers may offer other options like chat rooms, social media accounts, and even video calls.

These are great ways to communicate with a broker before investing your time. Work with brokers or lenders with their domain name at the end of their email address (like @sunwisecapital.com) and not @gmail.com.


No privacy policies 

A broker that doesn’t tell you what they’re doing with your personal information could mean they are selling your info to third parties. There are no guarantees you’ll get a loan through them; scams are common with brokers.


No credit checks

Your broker needs to know your FICO score to find a legitimate bank loan. If it doesn’t run at least a soft credit check, this could be another sign it’s a scam. No legit lender offers loans with “No credit checks.” An initial soft credit pull, yes.


No references, track record, or history

Suppose your broker can’t provide testimonials or contact details from previous clients through a verified third party. In that case, there’s a chance that their customers aren’t delighted with their services.


Ready To Move Your Business Forward?

A direct lender works directly with you to help you get the small business loans you need. Direct lenders eliminate the middleman to get the best financing options for you and your business. Plus, you can complete a simple application online from the comfort of your home or office.

However, they are limited in their options, and if they don’t offer the type of loan you need, you will receive a decline letter. If you’re using a broker, they will understand what you need in terms of loan type, loan amount, and loan terms and find the best lenders to compete for your business.

Higher Approval Odds

Online lenders might ask you to provide them with a lot of information when applying for a large business loan or an SBA loan beyond the one-page application and three months bank statements. You may need to provide documents like tax returns, profit and loss statements, and additional bank statements. Lenders will want to see your credit score, previous loan history, and any collateral you might offer. The net result is higher approval odds.

Faster Decisions

You won’t have to wait weeks or months to hear back. If you apply for a loan through a direct lender or broker, you might get a response in minutes to hours. You will have more time to focus on expanding your business and less time worrying whether or not you will get accepted.

Easier Applications

Lenders like Sunwise Capital allow you to apply for loans online with a short one-page application plus the last three months of your business bank statements.

Quick Funding

Approvals can be as fast as minutes. Once approved, you’ll receive it within hours or the next business day.


What Customers Are Saying – Rating Reviews


Can I Get a Business Loan with Bad Credit?

Small business direct lenders offer financing options for businesses with bad or no credit. These loans are not available through a bank or other financial institution.

Instead, they are provided directly by the lender. Direct lenders and business loan brokers offer many types of loans, including equipment leasing, commercial real estate, working capital, unsecured business loans, and lines of credit.


Direct Lender Loans (With or Without a Broker)

Business owners often wonder if they should go through a bank or other financial institution when looking for a loan. There are many benefits to using online or alternative direct lenders instead of banks. You might consider online direct lending (with or without a broker) for some fundamental reasons.

The biggest one is speed. You can find out immediately and not waste time submitting piles of paperwork only to be told “NO” weeks or months down the road.


The expertise you want

Sunwise Capital offers financing solutions and direct lending for businesses of all sizes. Our objective is to fund your business’s growth and expansion. We will customize a loan to your specific requirements because we appreciate that no two companies are identical.

Sunwise Capital offers business loans, term loans, equipment leasing, merchant cash advances, factoring, working capital loans, and other types of commercial financing. We also provide free customized loan consulting services to help you plan for growth and achieve success. Call us today at 888.456.9223 or apply online now.

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Mark J. Kane, Founder & CEO of Sunwise Capital, is a distinguished entrepreneur with over 16 years in business financing. Beginning as a psychologist, he quickly became a trailblazing Hospital Administrator. Mark has built multiple ventures, notably accelerating a startup to $18M within months. His transition to Sunwise Capital stems from a deep-seated desire to empower business owners with strategic financial solutions. Recognized for his expertise, Mark's leadership at Sunwise Capital reflects his commitment to fostering business growth and success. about the author.

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